Guide to DRF simulation tool

Transcription

1 Guide to DRF simulation tool Guide to DRF simulation tool Manila, 12 th May 2017 The views expressed in the presentations found in the ASEAN Disaster Risk Financing and Insurance (DRFI) Programme website are the views of their authors. The views expressed do not necessarily reflect the views or policies of ASEAN DRFI Programme, ASEAN Secretariat, or the governments of the ASEAN Member States. ASEAN DRFI Programme provides no guarantees to the accuracy of data included in the presentations. ASEAN DRFI Programme is not responsible for any consequences of the use of the presentations. Terminologies used in the presentations may not necessarily be consistent with the official terms of ASEAN.

2 Recap: General information 2

3 The fictive country that you manage Population Total: GDP 75 billion; country comparison to the world: 81 Budget Revenues: $15.8 billion Expenditures: $17.8 billion (=23.7% of GDP) Public debt 36.2% of GDP 3

4 Ex-ante financing options Reserves Contingent credit Insurance What Cost Coverage Amount Trigger Cost factor Set aside an amount each year None Fund vehicle is fixed at 2% of national budget (not accumulative) 1.0 (fixed) Pre-agreed credit line to deal with natural events Stand by fee: 0.5% Interest: 3% Payback period: 15 yrs Max. amount: 0.25% of GDP Trigger: Declaration of state of emergency 1.24 (fixed) Customized sovereign risk transfer Annual premium: tbd "unlimited" Parametric Depends on return period and actual loss 4

5 Define your ex-ante Disaster Risk Financing mix 5

6 Step 1: Select your peril / key risk 1. After clicking "Enter" on the landing page of the tool, you will find the screen displayed here. Question for consideration: Which peril affects your country the most? 2. Choose your key risk among the 4 perils by clicking on it. Guide to DRF simulation tool Jakarta 21st October

7 Step 2.1: Understanding the Loss Frequency Curve 1. Look at the graph to the right with the title Loss Frequency Curve Peril and discuss what you see. Question for consideration: - How are the x and y axis defined? - What form does the curve with increasing return period? - What is your explanation for the curve form? - In your country which return periods are the most concerning ones? Guide to DRF simulation tool Jakarta 21st October

8 Step 2.2: Understanding the Loss Frequency Curve 1. Read the estimated loss from the Loss Frequency Curve Peril and enter the numbers into orange fields. Question for consideration: What loss must be expected every 5 (25, 50, 75) years in absolute amounts? in % of GDP? 2. Click Next on the left side bar when done. Guide to DRF simulation tool Jakarta 21st October

9 Step 3: Define your financing need 1. Discuss for which amount you would like to use the combination of ex-ante financing options to have a swift disaster response. Think of the amount in percentage to the country GDP and enter your decision into the orange field Maximal coverage in % of GDP. Question for consideration: How much total coverage (all three instruments combined) do you need expressed in % of GDP? expressed in return periods? 2. Click Next on the left side bar when done. Guide to DRF simulation tool Jakarta 21st October

10 Step 4: Define your mix of financing instruments 1. Define which financing instrument should kick-in for which return period. Question for consideration: Which loss level (expressed in return periods) do you want to cover with Reserves? Contingent credit? Insurance? Guide to DRF simulation tool Jakarta 21st October

11 Step 5: Evaluate your financing instruments 1. Analyse and discuss the composition of your chosen financing mix based on the 3 charts to the right side of the screen. Question for consideration: What do the graphs describe? How large is your protection gap in the ex-ante financing mix? Why do you have this gap? How much would each financing instrument pay out towards your annual expected loss? 2. Click Next on the left side bar when done. Guide to DRF simulation tool Jakarta 21st October

12 Step 6: Total cost of your financing mix 1. Having defined your DRF mix, discuss in your group what the costs are for the chosen combination. Question for consideration: What will all three financing instruments combined cost in an average year? in case of a severe natural catastrophe? 2. Click Next on the left side bar when done. Guide to DRF simulation tool Jakarta 21st October

13 Step 7: Compare the three financing instruments in different scenarios 1. The tool generated an overview of average costs and loss coverage for different ranges of return period. Discuss the results and compare between the different scenarios. S M L XL Question for consideration: - For which scenario (up to which return period) does your chosen DRF makes most sense? - What are DRF alternatives to handle the less optimal scenarios? 2. Click Multiyear simulation on the left side bar when done. Guide to DRF simulation tool Jakarta 21st October

14 Step 7: Compare the three financing instruments in different scenarios 1. Click Run simulation on the right side and wait for the results to appear. Question for consideration: - How will your DRF perform over a 30 year period? - Which payments will you make each year for which instrument? 2. Click Severe example and/or Calm example on the right side and wait for the results to appear. Discuss the differences to the first simulation. Guide to DRF simulation tool Jakarta 21st October

15 Appendix: Loss frequency curves per peril 15

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21 Legal notice 2016 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re. The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation. 21