Driving Policy Reform for Disaster Resilience Lessons from World Bank Development Policy Financing (DPF) with a Catastrophe Deferred Drawdown Option (Cat DDO) 2 This note has been prepared by a team led by Oscar A. Ishizawa (Lead DRM Specialist, IAWU1) and consisting of Joaquin Muñoz Díaz and Rafael Van der Borght (IAWU1 and IDURM) with contributions from Sandra Valencia (IDURM) and Romain Fourmy (IAWU1 and IDURM). Inputs and overall guidance received from Zoe Trohanis (Lead DRM Specialist and DRM Global Lead, IDUDR). Cover photo: Flooding in a main road. © Naypong. Driving Policy Reform for Disaster Resilience Lessons from World Bank Development Policy Financing (DPF) with a Catastrophe Deferred Drawdown Option (Cat DDO) 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: +1-202-473-1000; Internet: www.worldbank.org Some rights reserved. 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Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org Cover design, layout, and illustrations: ULTRA Designs, Inc. 5 Contents 6 List of Abbreviations 7 Executive Summary 9 Introduction 10 Background 11 Objective of this Report 13 CHAPTER 1. Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 14 1.1 A Growing Demand: The Expansion of DPF Cat DDOs from Fiscal 2009 to Fiscal 2025 17 1.2 The Evolving Role of DPF Cat DDOs in Building Resilience 23 1.3 What Have DPF Cat DDOs Achieved so Far? 27 CHAPTER 2. Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 28 2.1 How DPF Cat DDOs Have Supported Countries in Advancing DRM Policy Reforms 34 2.2 A Structured Approach to Designing a Technically Sound DRM Policy Program 34 2.2.1. Review potential areas of engagement through a DRM diagnostic 51 2.2.2. Articulate DRM policy reforms with expected outputs, outcomes, and development impacts 53 2.2.3. Prioritize and sequence policy actions: From the Theory of Change to the DRM policy program 56 References 57 Appendix A. Additional DPF Cat DDO Portfolio Trends 6 List of Abbreviations Cat DDO Catastrophe Deferred Drawdown Option DDO Deferred Drawdown Option DPF Development Policy Financing DPO Development Policy Operation DRF Disaster Risk Financing DRM Disaster Risk Management DRM DPL Disaster Risk Management Development Policy Lending DRR Disaster Risk Reduction DRRM Disaster Risk Reduction and Management EP&R Emergency Preparedness and Response EWS Early Warning Systems FY Fiscal Year GDP Gross Domestic Product IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report ICRR Implementation Completion and Results Report Review IDA International Development Association IEG Independent Evaluation Group PA Prior Action PBA Performance-Based Allocation PDO Program Development Objective RI Result Indicator SDR/USD Special Drawing Rights to US Dollar Exchange Rate SIDS Small Island Developing States ToC Theory of Change 7 Executive Summary Since its inception in 2008, the Development increasing emphasis on strengthening Policy Financing (DPF) with a Catastrophe preparedness and response systems. The Deferred Drawdown Option (Cat DDO) instru- World Bank launched its Crisis Preparedness and ment has seen significant expansion across Response Toolkit in 2024 to reinforce this agenda all regions, channeling almost US$5 billion to and help countries better prevent, prepare for, support countries in the aftermath of a natural and recover from crises. This has prompted catastrophe. The DPF Cat DDO is a prear- a significant increase in the number of active ranged credit line offered by the World Bank that DPF Cat DDOs, which is likely to continue in the provides countries with immediate liquidity in the coming years. Likewise, development partners aftermath of an adverse natural event, including are expanding their use of policy instruments public health emergencies. similar to the DPF Cat DDO to help countries build disaster and climate resilience, and some have As a policy-based instrument, DPF Cat DDOs directly cofinanced World Bank DPF Cat DDOs. have served as a strategic platform for sustained policy dialogue, advancing disaster To inform the design of future DRM policy risk management (DRM) as part of countries’ programs with evidence-based insights, this overarching development policy agendas. study examined past DRM policy programs These operations have supported proactive supported through DPF Cat DDOs and distills policy measures to reduce exposure and vulner- key lessons learned. It presents the findings ability to disaster risk, while also driving reforms of a comprehensive review of all DPF Cat DDO in financial protection, legal and institutional operations approved as of December 31, 2024. DRM frameworks, and preparedness capaci- Through a statistical analysis of key trends at ties. They have also effectively elevated key DRM the portfolio level, the report shows how DPF Cat policy priorities to ministries of finance, whose DDO development objectives have evolved over convening authority helps catalyze cross-sectoral time, with more recent operations increasingly coordination and government ownership. This has embedded into broader development policy contributed to setting up overarching frameworks operations (DPOs) that combine upfront and for designing, implementing, and monitoring catastrophe-contingent financing. The review national disaster and climate resilience agendas, also illustrates the strong track record of DPF fostering a paradigm shift from reactive crisis Cat DDOs in achieving their development objec- response to proactive, risk-informed development tives, while underscoring that the availability of planning. technical assistance and robust risk analytics are instrumental in maximizing the impact of In the context of escalating risks driven by supported reforms. At the same time, it empha- climate change, rapid urbanization, and other sizes the difficulty of quantifying their contribution compounding factors, countries and inter- to resilience-building efforts, pointing to the need national development partners are placing 8 for improved approaches to fully leverage the outputs and outcomes that strengthen climate instrument’s potential in the future. and disaster resilience. Eventually, to ease tradeoffs between ambition and realism, the Drawing from the review of past DPF Cat DDOs, final design of the DRM policy program should be this note proposes a structured three-step prioritized and sequenced to ensure a coherent, approach for designing technically sound DRM feasible, and impactful program that aligns with policy programs. The approach begins with a national priorities, political momentum, and insti- diagnostic of a country’s existing DRM system tutional capacities. to identify major policy gaps that hinder resil- ience-building. This diagnostic is structured While the lessons are drawn primarily from DPF across six pillars that define the DRM system: Cat DDOs, the insights are broadly applicable to legal and institutional DRM framework, risk iden- strengthening DRM policy programs. They can tification, risk reduction, preparedness, financial be leveraged through other policy-based lending protection, and resilient reconstruction. Once a instruments, whether provided by the World Bank clear diagnostic has been carried out and major or other development partners. Even in contexts policy gaps have been identified, targeted policy where such instruments are not in place, these reforms can be designed to address them. To lessons offer valuable guidance for country-led ensure the relevance and criticality of these efforts to design and implement policy reforms reforms, policy actions should be connected to that advance DRM systems. 9 Introduction Background Objective of this Report Photo: Flooded rural roads in Thailand due to the rainstorm Tien Mu. © Weeraa. 10 Background embedded at the core of development planning and financing. Disasters triggered by natural hazards are becoming more frequent and severe, posing The World Bank supports countries in a growing threat to lives, critical infrastruc- strengthening their DRM policy programs and ture, and hard-won development gains. enhancing financial resilience to catastro- Each year, disasters inflict billions of dollars in phes through policy lending operations. A damages—a toll that continues to escalate due key instrument in this effort is the Development to rapid and unplanned urbanization, inad- Policy Financing with a Catastrophe Deferred equate infrastructure, and weak disaster risk Drawdown Option (DPF Cat DDO). The DPF Cat management (DRM) systems. Climate change DDO is a prearranged credit line that provides further exacerbates these risks by amplifying the countries with immediate liquidity in the after- severity and frequency of extreme events such math of a catastrophe, including public health as droughts, floods, and storms. The impacts are emergencies. It supports disaster preparedness disproportionately borne by the most vulner- and prevention by linking financing to policy and able populations, who are often concentrated in institutional actions aimed at building resilience. high-risk areas, face greater relative economic To access the DPF Cat DDO, recipients must have losses, and have limited access to resources and an adequate macroeconomic policy framework support networks to aid in recovery and resil- and a hazard risk management program in place. ience-building. Strengthening disaster resilience is not just a necessity, it is essential for sustain- The DPF Cat DDO instrument has seen growing able development and poverty eradication. adoption across all regions since it was first launched in Costa Rica in September 2008. Despite the clear economic and social bene- Initially available only to International Bank for fits of disaster prevention and preparedness, Reconstruction and Development (IBRD) coun- mobilizing countries and development partners tries, DPF Cat DDOs were later extended to to prioritize these investments remains a chal- include International Development Association lenge. Several barriers hinder proactive action, (IDA) countries, broadening access to lower-in- including financial constraints, limited awareness come nations. Almost US$5 billion has now been of disaster risks and the benefits of prevention, channeled to IBRD and IDA countries. As a contin- and a tendency among governments to favor gent financing instrument, the DPF Cat DDO is visible postdisaster response over less tangible approved before a disaster occurs, ensuring that risk-reduction measures. As a result, only a small funds are quickly disbursed once the event takes fraction of total official development assistance place. This provides early budget support while for disasters is allocated to prevention and additional funds from sources such as bilateral preparedness (UNDRR 2024). This perpetuates a aid or reconstruction loans are being mobilized.1 costly cycle of crisis response, diverting resources Besides the DPF Cat DDO, the World Bank away from long-term development and leaving offers a broad suite of instruments designed countries repeatedly vulnerable to the devas- to provide ex-ante support for strength- tating impacts of disasters. Breaking this cycle ening DRM and financial resilience. These requires a fundamental shift in how disaster risk include, among others, regular DPFs and DPFs is managed, ensuring that resilience-building is 1 For more details on the financial features of the instrument, readers can refer to DPF Cat DDO product notes for IBRD and IDA countries. 11 The DPF Cat DDO is a could help address these gaps and constraints; and monitoring and, when required, assisting prearranged credit line in the implementation of these reforms. Since that provides countries with September 2008, the World Bank has supported 249 DRM-related policy reforms across multiple immediate liquidity in the areas through DPF Cat DDOs. These reforms aftermath of a catastrophe, reflect the distinct disaster risk profiles and specific institutional and policy contexts of each including public health country. Taken together, they offer a rich body emergencies. of evidence, insights, and lessons that can be leveraged to inform the design of comprehen- sive policy frameworks aimed at strengthening disaster resilience. with a Deferred Drawdown Option (DDO), which provide general budget support and can be Objective of this Report drawn upon at the country’s request to address This report aims to provide technical guid- economic shocks or fiscal needs; Investment ance to DRM practitioners—both from national Project Financing, which may incorporate a governments and development institutions—in DDO to finance specific project expenditures designing robust DRM policy programs that triggered by predefined conditions, such as a strengthen disaster resilience. Leveraging parametric indicator, market event, or contrac- the World Bank’s extensive operational expe- tual obligation; Contingent Emergency Response rience with DPF Cat DDOs, this study reviewed Projects and Contingency Emergency Response DPF Cat DDO operations to identify historical Components, which enable flexible and timely and emerging trends in policy reforms aimed financing in response to emergencies; Program- at strengthening resilience to climate and for-Results operations, which link disbursements disaster risks. The insights from this analysis offer to the achievement of program results; Disaster both qualitative and quantitative evidence to Risk Transfer Transactions through, for instance, inform the development of effective DRM policy catastrophe (cat) bonds covering hurricane, programs. earthquake, or pandemic events to manage the risks of high-intensity but low-frequency disas- This study reviewed a total of 60 DPF Cat DDOs ters; and Advisory Services and Analytics, which approved between September 1, 2008, and provide nonlending support to help advance key December 31, 2024. The exercise involved an development objectives. in-depth examination of portfolio trends and data, alongside a review of program documents As a policy instrument, the DPF Cat DDO and result reports. The findings are presented in aims to drive change by supporting govern- two chapters. The first consolidates key trends ment engagement on a DRM policy reform emerging across the DPF Cat DDO portfolio and program. This process involves assessing and documents the evolving nature of the DPF Cat identifying gaps and constraints in the country’s DDO instrument. The second takes a broader DRM-related policies and institutional frameworks, and more reflective approach, distilling practical including sectors where integrating DRM could insights and lessons learned to inform the design enhance overall disaster resilience; supporting of DRM policy reforms and programs. Insights are the government in formulating policy actions that organized around six foundational DRM pillars: 12 legal and institutional DRM framework, risk iden- increasingly exploring instruments similar to the tification, risk reduction, preparedness, financial DPF Cat DDO, while others have opted to directly protection, and resilient reconstruction. cofinance World Bank DPF Cat DDOs. As such, the insights from this report are applicable to enhance While the lessons learned stem primarily from DRM-related policy programs through other poli- DPF Cat DDOs—the World Bank’s long-standing cy-based lending instruments, whether provided instrument for supporting governments in by the World Bank or other development partners. strengthening disaster and climate resil- Even in the absence of such instruments, these ience policy reforms—these insights are not insights can inform countries’ efforts to design and limited to the use of DPF Cat DDOs. Recognizing implement policy reforms to advance their DRM that support for DRM policy reforms requires policy frameworks. strong engagement, development partners are 13 Chapter 1 Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 1.1. A Growing Demand: The Expansion of DPF Cat DDOs from Fiscal 2009 to Fiscal 2025 1.2. The Evolving Role of DPF Cat DDOs in Building Resilience 1.3. What Have DPF Cat DDOs Achieved so Far? Photo: Demolished house after extreme weather in Botswana. © poco_bw. 14 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 1.1 the Caribbean region, which, along with East Asia and the Pacific, continues to account for a large A Growing Demand: share of the DPF Cat DDO portfolio. In contrast, the Europe and Central Asia, Middle East and North The Expansion of DPF Cat Africa, and South Asia regions have seen relatively DDOs from Fiscal 2009 to fewer DPF Cat DDOs prepared (figure 1.1, right). Fiscal 2025 Several factors have contributed to the increasing use of DPF Cat DDOs, notably the The DPF Cat DDO was first introduced in fiscal expansion of eligibility to IDA countries under 2009 for IBRD countries and has since expe- IDA18,4 which significantly broadened access to rienced increasing uptake.2 As of December the instrument to the most vulnerable coun- 31, 2024, 60 DPF Cat DDOs have been approved tries. Recognizing that countries may hesitate to in 38 countries—32 of which have already been allocate resources from their performance-based closed, reflecting a continued upward trajec- allocation (PBA) for contingent financing, IDA18, tory in demand (figure 1.1., left).3 The first DPF Cat IDA19, and the current IDA20 introduced incentives DDOs were approved in the Latin America and Figure 1.1. Number of Approved DPF Cat DDOs by Region (Left) and Status (Right) South Asia Middle East & North Africa Europe & Central Asia Western & Central Africa Eastern & Southern Africa East Asia & Pacific Latin America & Caribbean Active Closed 10 South Asia Number of DPF Cat DDOs 8 Middle East & North Africa Latin America 6 & Caribbean Europe & Central Asia 4 East Asia & Pacific Western & 2 Central Africa Eastern & Southern Africa 0 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 0 5 10 15 20 Fiscal Year Number of DPF Cat DDOs Source: Based on World Bank data as of December 31, 2024. Note: DPF Cat DDO = Development Policy Financing with a Catastrophe Deferred Drawdown Option. 2 The fiscal year begins on July 1 of the previous year and runs through June 30 of the designated year. 3 The statistics presented in this chapter are original calculations based on a dataset compiled by the authors as of December 31, 2024, and do not represent the official World Bank figures. For IDA countries, the Special Drawing Rights to US dollar (SDR/USD) exchange rate applied is that specified in the program document. 4 IDA18 (fiscal 2018–20) was the World Bank’s 18th IDA replenishment cycle. It mobilized a then-record $75 billion in financing and marked a historic transformation in both scale and approach. Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 15 for countries to use the DPF Cat DDO.5 Financial crisis preparedness and response strategies. incentives are structured to provide financial This was reflected in a notable spike in DPF Cat leverage on the allocated PBA and minimize DDO approvals in fiscal 2020. In response to the opportunity costs. Under IDA20, the required PBA pandemic, a total of US$1.7 billion was disbursed for DPF Cat DDOs was reduced from 50 percent through DPF Cat DDOs, demonstrating the instru- to a minimum of 25 percent of the total financing, ment’s relevance and value in times of systemic with up to 25 percent covered using the Crisis shocks. Looking ahead, the introduction of the Response Window resources and up to 50 Crisis Preparedness and Response Toolkit is likely percent covered by general IDA resources (World to further reinforce the attractiveness of the DPF Bank 2024). Cat DDO as a core World Bank instrument to help countries prepare for times of severe crisis. In fact, The COVID-19 pandemic underscored the since the approval of the Toolkit, the number of importance of rapid-disbursing contingent countries with an active DPF Cat DDO increased financing, prompting many countries to from 19 (as of end-January 2024) to 31 (as of explore and adopt DPF Cat DDOs as part of their end-July 2025). Figure 1.2. Number of DPF Cat DDOs per Fiscal Year (Approved) 1st CAT DDO 2nd CAT DDO 3rd CAT DDO 4th CAT DDO 10 8 Number of DPF Cat DDOs 6 4 2 0 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 Fiscal Year Source: Based on World Bank data as of December 31, 2024 Note: DPF Cat DDO = Development Policy Financing with a Catastrophe Deferred Drawdown Option. 5 IDA19 (fiscal 2020–22) was the World Bank’s 19th IDA replenishment cycle (originally planned for three years but shortened to two due to the COVID-19 pandemic). It mobilized a then-record $82 billion in financing, with $23.5 billion in donor contributions. IDA20 (fiscal 2022–25) refers to the 20th IDA replenishment, launched a year early in response to the urgent development needs triggered by the pandemic and other overlapping crises. It rep- resents the largest financing package in IDA’s history, with a record $93 billion envelope, supported by $23.5 billion in contributions from 52 member countries, capital market financing, carryover from IDA19, internal resources, and transfers from IBRD. 16 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio The data show that countries closing a DPF US$4.8 billion has been disbursed (figure 1.3). Cat DDO often request a follow-up operation The largest cumulative disbursements have been to continue accessing contingent financing in made in the Philippines (US$1.5 billion), Colombia case of a natural catastrophe. As of December (US$700 million), Romania (US$679 million), and 31, 2024, 18 countries have approved a second DPF Guatemala (US$285 million). In per capita terms, Cat DDO, 3 have moved on to a third operation, Small Island Developing States (SIDS) have and 1 is now implementing a fourth (figure 1.2).6 received the highest levels of support, reflecting This pattern is particularly evident in the East Asia both their heightened vulnerability to disasters and Pacific and Latin America and the Caribbean and the scale of financial assistance provided. regions, where DPF Cat DDOs were first adopted. Tuvalu received US$611 per capita, followed by St. Countries in these regions are now actively Vincent and the Grenadines (US$197), Grenada advancing new operations, reflecting continued (US$171), Samoa (US$84), Tonga (US$76), and demand for the financial instrument and its Vanuatu (US$61). While IBRD countries account for proven value in helping countries strengthen most of the disbursed funds (85 percent versus their DRM and overall crisis preparedness and 15 percent for IDA countries), the use of DPF Cat response systems. DDOs in IDA countries has increased significantly since its launch in fiscal 2018. Since then, 35 DPF As of December 31, 2024, a total of US$7.1 billion Cat DDOs have been approved in IDA countries, 11 has been approved through DPF Cat DDOs, and in IBRD countries, and 1 in a blend IBRD/IDA country. Figure 1.3. DPF Cat DDO Disbursements (in million US$) per Funding Source $1792M IDA IBRD $1750 $1500 $1250 Disbursement Amount $1000 $750 $609M $508M $535M $500 $410M $258M 250 $217M $155M $101M $101M $51M $25M $45M 0 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 Fiscal Year Source: Based on World Bank data as of December 31, 2024. Note: IBRD = International Bank for Reconstruction and Development; IDA = International Development Association. 6 This contrasts with the limited use of the renewal clause. The 3-year drawdown period of a DPF Cat DDO may be renewed up to four times in IBRD countries, for a maximum of 15 years in total, and once for a maximum of 6 years in total in IDA countries. However, the duration of 75 percent of closed DPF Cat DDOs has not exceeded 4 years (see figure A.4 in appendix A). Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 17 DPF Cat DDOs have been instrumental in been in SIDS (38 percent) in 15 different coun- supporting SIDS. SIDS face significant disaster and tries, with 7 of these countries (47 percent) having climate-related risks due to their limited size and approved a second DPF Cat DDO. high exposure to adverse natural events. About 9 percent of disasters in small states cause damage of more than 30 percent of gross domestic product 1.2 (GDP), compared to less than 1 percent for larger The Evolving Role of DPF states, with severe macrofiscal consequences (IMF 2016). These nations are also highly vulnerable to Cat DDOs in Building the effects of climate change, including rising sea levels and increasing frequency of extreme weather Resilience events. Most SIDS are members of IDA, so they can The expected outcomes of DPF Cat DDOs, as leverage the financial incentives in place to obtain articulated in their Program Development up to US$4 of contingent financing by allocating Objectives (PDOs), have undergone a notable US$1 from their own PBA envelope. This positions DPF transformation over time—reflecting accu- Cat DDOs as a very attractive and cost-efficient mulated lessons, shifting priorities, and an option for rapid postdisaster financing, providing a evolving risk landscape. Importantly, this evolu- crucial injection of fresh liquidity in the aftermath of tion has not entailed replacing earlier objectives a natural catastrophe while supporting a program but rather building on them through successive of policy reforms aimed at enhancing disaster and additions. A review of PDO formulations reveals climate resilience. As a result, of the 60 DPF Cat a four-phase progression (figure 1.4)7, which is DDOs approved as of December 31, 2024, 23 have presented in the following subsections. Figure 1.4. Progressive Evolution of DPF Cat DDO Program Development Objectives First DPF Disbursement trigger expanded Cat DDO to public health-related events COVID-19 Strengthening Building Emphasis Strengthening Disaster Risk resilience on public macrofiscal (2009) to climate- health-related resilience related events events (2022) (2018) (2020) Expansion of DPF Cat DDOs Increasing use Introduction of the Crisis to IDA countries of mixed DPOs Preparedness Response Toolkit Source: Original figure for this publication. Note: Puzzle pieces reflect Program Development Objective (PDO) wording while boxes correspond to corporate evo- lutions. DPF Cat DDO = Development Policy Financing with a Catastrophe Deferred Drawdown Option; DPO = Develop- ment Policy Operation; IDA = International Development Association. 7 The identification of the four-stage evolution of PDOs was derived through an automated analysis using a large language model, which examined the wording of PDOs from publicly available DPF Cat DDO program documents. This approach enabled a systematic identification of recurring themes and trends, providing insights that align with observed shifts in practice over time. 18 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio Initially focused on core DRM institutional and legal 64 percent climate cobenefits—driven primarily reforms, DPF Cat DDOs have increasingly expanded by adaptation efforts, with minimal contributions their scope to emphasize climate resilience. from mitigation. The first DPF Cat DDOs aimed to strengthen The COVID-19 pandemic underscored the impor- government capacity to manage disaster tance of preparedness for public health–related risks and improve preparedness for natural emergencies. catastrophes. Initial operations supported the development and implementation of a national Although DPF Cat DDOs were originally DRM law and disaster risk reduction (DRR) designed to be triggered by geophysical and plans and strategies and facilitated access to hydrometeorological disasters to provide timely and predictable postdisaster emergency rapid postdisaster financing, their scope was financing. As recognition of the interlinkages formally expanded in 2016 to include public between climate change and disaster risk health–related emergencies caused by a grew, policy reforms supported under DPF Cat biological event (see box 1.1). The expansion of DDOs expanded in scope to more explicitly the definition for natural catastrophes proved address climate-related hazards. Since 2018, essential during the COVID-19 crisis, when DPF PDOs have increasingly emphasized resilience Cat DDOs were successfully disbursed to support to climate impacts, in addition to disaster resil- timely government preparedness and response ience, signaling the instrument’s evolving role efforts. Since 2020, many DPF Cat DDOs have in supporting broader climate adaptation and broadened their development objectives to resilience agendas. This shift is evident in the inte- explicitly incorporate the public health–related gration of climate-related reforms into supported emergency dimension, supporting policy and policy programs and the consistently substantial institutional reforms aimed at strengthening climate cobenefits associated with DPF Cat DDOs. public health emergency systems, enhancing On average, DPF Cat DDO financing has achieved pandemic preparedness, and bolstering overall Box 1.1. The DPF Cat DDO Disbursement Trigger Development Policy Financing with a Catastrophe counterparts. A parametric trigger, commonly Deferred Drawdown Option instruments (DPF Cat used to determine payouts of cat bonds and other DDOs) can be disbursed only when a prespec- parametric risk transfer instruments, entails basis ified trigger linked to a catastrophe—typically risk. While it can enable rapid disbursements, it may the member country’s declaration of a state of appear less predictable to many client countries emergency—has been met. While the World Bank’s and could be technically challenging to design for operational policy covering DPF Cat DDOs does a broad range of hazards. A policy-based trigger not specifically define what constitutes a natural has also allowed for sufficient flexibility to easily catastrophe, all specific conditions of the prespec- expand its definition to cover public health–related ified trigger are detailed in the DPF Cat DDO’s legal emergencies caused by a biological event. In 2016, agreement. This mechanism aligns with the instru- it was clarified that DPF Cat DDO drawdown triggers ment’s policy-based nature and provides strong could cover such emergencies without requiring predictability, as it is anchored in national laws and any restructuring of the DPF Cat DDO’s operational regulations in place and familiar to government policies. Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 19 resilience to public health–related shocks. During COVID-19, 17 DPF Cat DDOs were triggered, Figure 1.5. DPF Cat DDO PAs with Climate and Health Wording (as % of FY’s Total PAs) resulting in total disbursements of US$1.7 billion (44 percent in Latin America and the Caribbean, Climate Health 27 percent in Europe and Central Asia, 16 percent 100% in Middle East and North Africa, and 9 percent in PAs with specific wording (as % of total PAs) Eastern and Southern Africa). Prior to this, only the Samoa DPF Cat DDO had been disbursed for 80% a public health–related emergency unrelated to COVID-19, specifically for a measles outbreak in 60% December 2019. From a quantitative perspective, climate 40% change and climate-related events are increasingly integrated into the policy reforms 20% supported by DPF Cat DDOs, while public health–related reforms saw a surge after 0% 2019, but have declined since 2023 (figure ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 1.5).8 These trends align with those observed Fiscal Year at the PDO level and highlighted in figure 1.4. Source: Based on World Bank data as of December 31, Before 2018, prior actions (PAs) did not explicitly 2024. mention these themes. It is important to note Note: PAs = prior actions. that climate or health-related issues might have been addressed more broadly, even if not and DPO series, offering a mix of upfront and explicitly stated as part of the wording of the PAs. catastrophe-contingent financing through Nonetheless, these findings suggest that DPF Cat a single operation (figure 1.6). For this report, DDOs have increasingly focused on supporting such operations are referred to as “mixed DPOs,” reforms related to these dimensions. as opposed to “standalone DPF Cat DDOs.”9 The Samoa Second Resilience DPO with a Cat DDO and the Malawi DRM DPF Cat DDO were the first More recent operations have prioritized strength- DPFs combining upfront budget support and ening macrofiscal resilience. the Cat DDO instrument into a single operation. These mixed DPOs have driven the emergence of Operations that include DPF Cat DDOs are macro-fiscal resilience considerations in PDOs, evolving from standalone, catastrophe-con- as highlighted in figure 1.4. They also created tingent financing operations to being opportunities to present more coherent reform increasingly integrated as part of broader DPOs programs, as several supported measures 8 PAs were assigned a “climate wording tag” if they included any of the following keywords: climate, adaptation, cli- mate change adaptation, or Nationally Determined Contribution; and a “health wording tag” if any of the following were included: health, vaccine, covid, medical, epidemic, pandemic, disease, or outbreak. After the initial tagging, each PA was manually reviewed to remove any false positive, such as instances where the term “health” referred to fiscal health or where “healthy” described buildings, ensuring that only relevant reforms were captured. 9 In this document, a mixed DPF Cat DDO refers to operations in which the financing is split into two separate loans or credits: one for immediate disbursement upon effectiveness, and another structured as a Cat DDO, to be dis- bursed contingent on the occurrence of a natural catastrophe. 20 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio Figure 1.6. Distribution of DPF Cat DDOs by Operation Type Mixed DPO Standalone Cat DDO 10 8 Number of DPF Cat DDOs 6 4 2 0 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 Fiscal Year Source: Based on World Bank data as of December 31, 2024. Note: Cat DDO = Catastrophe Deferred Drawdown Option; DPO = Development Policy Operation. improved fiscal risk management by accounting aftermath of a disaster, the need for standard for disaster- and climate-related shocks, budget support, and the benefits of stream- strengthened the resilience of public investments, lined operations in environments with limited and enhanced the responsiveness of public policy reform capacity. These mixed DPOs are financial management systems, thus helping particularly well-suited to SIDS as they allow ensure that the core preconditions for DPF— consolidation of operations, PAs, and reporting namely a sound macroeconomic framework and requirements into a single framework, thereby robust budgetary systems—are met. improving efficiency and reducing transac- tion costs for the government. A DPF Cat DDO is The dual structure of upfront and natural active for a three-year period with the possibility catastrophe-contingent financing in a single to renew and requires ongoing implementation operation is often observed in SIDS. Reflecting support to assess progress achieved against this trend, 64 percent of these mixed DPOs have the results indicators. This implies that mixed been approved in SIDS, particularly in the East DPOs also allow for a more comprehensive Asia and Pacific region. This approach simul- 10 measurement of medium-term results across taneously addresses several critical needs: the all PAs, including those unrelated to the Cat DDO importance of policy reforms to strengthen component. disaster and climate resilience, the need for contingent financing that disburses quickly in the In contrast, DPF Cat DDOs in Latin America and the Caribbean SIDS have been mostly prepared as standalone DPF 10 Cat DDOs. Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 21 From a policy program perspective, standalone tend to reduce coordination needs with the DPF Cat DDO operations focus on supporting World Bank and often have shorter preparation DRM and climate-related policy reforms, while time than regular DPF Cat DDOs. However, this mixed DPOs support broader policy programs approach entails trade-offs as the DRM policy that extend beyond DRM and climate-related dialogue may be diluted into a broader reform reforms. Two patterns emerge for these mixed program, undermining the role of DPF Cat DDOs DPOs: either resilience-building reforms are main- as a policy tool to advance disaster resilience. streamed into a broader policy reform program related to fiscal and macroeconomic manage- ment (for example, Cabo Verde) or other sectoral Enhancements have been made to DPF Cat DDOs reforms, or they are structured as a separate DRM as part of the Crisis Preparedness and Response pillar in addition to other policy reforms targeted Toolkit.12 by the DPO (for example, Tuvalu). Importantly, 11 as DPF Cat DDOs increasingly support reforms Despite its advantages in providing access that are not exclusively related to DRM or climate to contingent financing, some factors have resilience, climate cobenefits from these oper- limited the demand for DPF Cat DDOs as part of ations have declined. Standalone DPF Cat countries’ crisis preparedness and response DDOs have achieved an average of 82 percent strategies and programs (World Bank 2024). climate cobenefits, although no DPF Cat DDO has These include governments’ preference for cash reached 100 percent of climate cobenefits since in hand and the DPF Cat DDO country limits, fiscal 2022. In comparison, operations attain only particularly for IBRD countries with headroom 36 percent on average when DPF Cat DDOs are issues. Some IBRD countries have accessed DPF part of mixed DPOs (see figure 1.7). Cat DDOs close to their borrowing limits, which suggests that these limits may not be sufficient to As DPF Cat DDOs are increasingly integrated meet a growing demand for contingent financing. into DPO series, it is important to care- fully review the advantages and potential As the World Bank strengthens its commitment constraints of this approach. While it is too early to advancing countries’ crisis preparedness to draw robust insights, incorporating DPF Cat and response capabilities, enhancements to DDOs into a DPO series may support DRM-related the DPF Cat DDO instrument have been included policy reform trajectories over a longer time in the World Bank’s Crisis Preparedness and horizon and facilitate more sustained dialogue, Response Toolkit. Recent enhancements which is a key enabling factor in building resil- include doubling DPF Cat DDO country limits,13 ience. These mixed DPFs also represent an the introduction of scalable financing that can efficient instrument for client countries as they be approved after a crisis occurs and allowing 11 The reform program of the Cabo Verde DPF Cat DDO is structured in three pillars, all relating to DRM: improve debt transparency and reduce fiscal risks stemming from state-owned enterprises and climate-related shocks; strengthen the resilience of the poor and vulnerable to shocks, particularly droughts; and support a climate-re- silient and sustainable private sector–led recovery. On the contrary, Tuvalu’s DPF Cat DDO is structured in three pillars, for which DRM is considered only in the second one: strengthen public financial management; enhance infrastructure management and disaster- and climate-resilience; and improve social protection and inclusion in education. 12 See https://www.worldbank.org/en/about/unit/brief/crisis-preparedness-and-response-toolkit. 13 Country limits for DPF Cat DDOs in IBRD countries were raised to US$1 billion or 0.5 percent of GDP (whichever is less), and to US$500 million or 1 percent of GDP (whichever is less) for IDA countries. IDA client countries with limits below US$40 million may request a DPF Cat DDO up to a maximum of US$40 million. 22 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio Figure 1.7. Adaptation and Mitigation Cobenefits by DPF Cat DDO Adaptation cobenefits Mitigation cobenefits Average of total cobenefits Standalone DPF Cat DDOs Mixed DPOs Peru (FY11) Malawi (FY19) El Salvador (FY11) Samoa (FY19) Philippines (FY12) Panama (FY12) SVG (FY20) Colombia (FY13) Sri Lanka (FY14) Tuvalu (FY20) Seychelles (FY15) Samoa (FY21) Peru (FY15) Philippines (FY16) Fiji (FY21) Serbia (FY17) Tuvalu (FY22) Kenya (FY18) Romania (FY18) Tonga (FY22) Dominican Republic (FY18) Cabo Verde (FY19) Cabo Verde (FY23) Guatemala (FY19) Malawi (FY24) Nepal (FY20) Morocco (FY20) Mauritania (FY24) Madagascar (FY20) Bhutan (FY20) Fiji (FY24) Vanuatu (FY20) Gambia, The (FY24) Honduras (FY20) Maldives (FY20) Kiribati (FY24) Grenada (FY20) Solomon Islands (FY24) Vanuatu (FY22) Philippines (FY22) Benin (FY24) Dominica (FY22) Colombia (FY22) Tuvalu (FY24) Panama (FY22) Tonga (FY24) Honduras (FY22) Dominican Republic (FY23) Zambia (FY25) Costa Rica (FY23) Philippines (FY24) Liberia (FY25) Romania (FY25) Sierra Leone (FY25) Bhutan (FY25) Nepal (FY25) Marshall Islands (FY25) 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Climate cobenefits % Climate cobenefits % Source: Based on World Bank data as of December 31, 2024. Note: Cat DDO = Catastrophe Deferred Drawdown Option; DPO = Development Policy Operation. the DPF Cat DDO to be used as a disbursing These changes as well as the IDA incentives mechanism of the Rapid Response Option (RRO), mentioned in section 1.1 are expected to drive enabling repurposing of up to 10 percent of undis- an increased demand for DPF Cat DDOs from bursed and uncommitted balances in a portfolio client countries, reinforcing the need to frame per year to respond to emergencies and crisis. DPF Cat DDOs not just as contingent financing These enhancements are designed to expand instruments, but more importantly, as cata- access to catastrophe-contingent financing by lysts for advancing substantive emergency addressing barriers to DPF Cat DDO uptake, while preparedness and resilience policy reforms. also providing a critical opportunity to leverage more ambitious policy reforms for preparedness and resilience (World Bank, 2024). Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 23 1.3 Figure 1.8. Count of DPF Cat DDOs by Rating What Have DPF Cat DDOs Categories Achieved so Far? Satisfactory 0 2 10 DPF Cat DDOs have demonstrated a strong track record of achieving their development objec- tives. Outcome ratings show that DPF Cat DDOs Outcomes Moderately have consistently outperformed the average for Satisfactory 0 8 4 DPOs across the World Bank. With the exception of 14 the DPF Cat DDO in Kenya, all DPF Cat DDOs have been rated moderately satisfactory or above in Moderately 0 1 0 achieving their intended outcomes. In comparison, Unsatisfactory 74 percent of all DPOs closed in fiscal 2009–25 were assessed as moderately satisfactory or Moderately Moderately Satisfactory above.15 Likewise, 48 percent of DPF Cat DDOs were Unsatisfactory Satisfactory Bank Performance rated satisfactory or above, while only 29 percent of all DPOs achieved similar outcome ratings. Source: Based on ICRR data as of December 31, 2024. The success of DPF Cat DDOs can be attributed correlate with the World Bank’s performance, to several factors. These include: a clear focus suggesting a strong link between successful on targeted intervention areas, as evidenced by outcomes and the quality of World Bank support the smaller average number of PAs compared (figure 1.8). to standard DPFs—typically about half; strong complementarities with technical assistance, DPF Cat DDOs have also shown a strong perfor- advisory services, investment lending, and trust mance in achieving their Result Indicators fund–financed activities, which collectively (RIs). A comprehensive review of the 511 RIs support sustained policy dialogue and reinforce utilized across 60 DPF Cat DDOs (395 of which reform implementation (World Bank 2022); and specifically related to DRM) was conducted. The longer deferral periods than regular DPFs, with the analysis of achievement levels for closed DPF Cat period between approval and closing for DPF Cat DDOs indicates that a significant majority of these DDOs ranging from three to nine years. The posi- operations successfully met over 80 percent of tive outcomes ratings of DPF Cat DDOs closely their RI targets.16 This achievement rate not only 14 The outcome rating is the primary metric used for assessing DPOs’ effectiveness in achieving desired outcomes at completion. Due to changes in the reporting format, only “Outcomes” and “Bank Performance” ratings are retrieved for closed DPF Cat DDOs. These ratings are initially assigned by country teams in the Implementation Completion and Results Report (ICR) and may subsequently be reviewed and, if necessary, revised by the Independent Evalua- tion Group (IEG) in the Implementation Completion and Results Report Review (ICRR). The ratings presented in this section were retrieved from ICRRs. 15 See IEG dashboard. 16 A total of 231 RIs were reviewed for closed DPF Cat DDOs. First, the achievement level of each RI was calculated by comparing the reported result in the ICRR with the target value, resulting in a percentage score between 0 percent and 100 percent. In cases where numerical values were not provided, achievement levels were assigned using the available qualitative information and expert judgment. Second, the achievement level of each PA was computed as the average of the achievement values of the RIs associated with the PA. Finally, the level of achievement of the DPF Cat DDO was calculated as the average of the achievement of the DRM-related PAs of the operation. 24 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio highlights the effectiveness of the DPF Cat DDOs reflects a broader technical challenge linked to in reaching their objectives but also correlates the measurement of resilience. Selecting indi- closely with their positive outcome ratings, as cators that capture the downstream effects of illustrated in figure 1.9. a DRM reform is complex because progress in resilience is difficult to observe in short periods of However, capturing DPF Cat DDOs’ contribution time, and its direct measurement is often contin- to resilience-building efforts remains chal- gent upon the materialization of a disaster. In lenging. The review of individual RIs reveals that fact, observing how a DRM policy program has most operations do not provide sufficient infor- enhanced resilience would require comparing mation to gauge how supported reforms have the impacts of similar disasters before and after produced changes that contribute to building the implementation of the program or devel- climate and disaster resilience. This limitation oping model scenarios.17 Aligned with this finding, Figure 1.9. Level of Achievement of DPF Cat DDOs Outcomes rating from the ICRR: Moderately Unsatisfactory Moderately Satisfactory Satisfactory Seychelles (FY15) Samoa (FY19) Philippines (FY12) Costa Rica (FY09) El Salvador (FY11) Colombia (FY09) Panama (FY12) Philippines (FY16) Romania (FY18) Bhutan (FY20) Peru (FY11) Peru (FY15) Guatemala (FY19) Serbia (FY17) Honduras (FY20) Dominican Republic (FY18) Cabo Verde (FY19) Sri Lanka (FY14) Vanuatu (FY20) Guatemala (FY09) Colombia (FY13) Maldives (FY20) Malawi (FY19) Morocco (FY20) Kenya (FY18) 0% 20% 40% 60% 80% 100% PA Achievement % Source: Based on World Bank data as of December 31, 2024. Note: ICRR = Implementation Completion and Results Report Review; PA = prior action. 17 Risk and economic modeling techniques can help simulate this situation, but these methods require a high-level of technical competencies and have rarely been used in DPF Cat DDOs Result Frameworks. Most RIs used in DPF Cat DDOs are in fact proxy indicators for resilience. Proxy indicators are indirect measures to assess progress toward an outcome when direct measurements are either too complex, costly, slow, or impractical. They measure complex or abstract concepts through more observable data that correlates with the desired outcome. In the case of DPF Cat DDOs, proxy indicators signal the ability or capacity of people, assets, or systems to be more resilient, without direct- ly measuring the actual change in this capacity. For example, instead of measuring community resilience directly, one might measure the number of households covered by a catastrophic risk insurance program as a proxy. Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio 25 IEG (2022) reviewed all World Bank operations reduction and resilience targets and outcomes including a DRR component between fiscal 2010 and better align DPF Cat DDO contributions to and fiscal 2020 and found that 65 percent of its ongoing efforts to measure vulnerability and DRM DPOs (including DPF Cat DDOs) do not have resilience to disaster and climate risk.18 indicators capturing resilience outcomes. IEG (2022) further provides examples of outcome Beyond measurable outcomes, DPF Cat DDOs indicators that can help assess the contribution have been instrumental in establishing a of DRM reforms to enhanced resilience. These strategic platform for sustained DRM policy usually assess changes in preparedness (for dialogue with ministries of finance and budget example, “improvements in lead time for flood and economic planning agencies. Disaster and response operations”) or to exposure and vulner- climate resilience have rarely been prioritized ability conditions (for example, “the share of new by ministries of finance in developing countries, buildings that comply with building standards,” which often overlook the significant economic, “number of schools that have finalized struc- poverty, and social impacts associated with tural vulnerability studies and initiated retrofitting weak DRM systems. In this context, DPF Cat DDOs works,” and “the percentage of smallholder have served as effective instruments to advance agricultural land covered by disaster insurance”) reforms in financial protection, offering a strategic that provide measures of actual development entry point for engaging ministries of finance significance. by aligning with their institutional mandates. Although difficult to quantify, this influence is crit- Therefore, while the outcome ratings and RI ical for fostering long-term resilience outcomes, achievement scores presented provide some as these ministries are well-positioned to prior- indication of the effectiveness of DPF Cat itize and allocate resources for DRM. DPF Cat DDOs—namely, the extent to which they have DDOs have thus served as an effective platform met their intended targets—they offer limited to elevate key policy priorities to the ministry of insight into the actual level of risk reduction finance, whose convening authority helps cata- achieved by policy reform programs supported lyze cross-sectoral coordination and government by DPF Cat DDOs. When DPF Cat DDOs do not ownership. Their leadership can also support the include outcome indicators, very limited evidence integration of DRM considerations across sectors, is available to assess the changes to prepared- given their greater capacity to mobilize line ness, exposure, and/or vulnerability conditions ministries compared to traditional emergency resulting from the implementation of DRM-related management agencies, which often face institu- policy reforms. Importantly, this lack of evidence tional and operational limitations. limits our understanding of how these reforms contribute to broader development impacts, such DPF Cat DDOs have also helped set up overar- as reduced economic losses and disaster-re- ching frameworks to design, implement, and lated mortality. Addressing this gap is critical to monitor countries’ disaster and climate resil- enhance the World Bank’s ability to showcase risk ience agendas. DRM is inherently multisectoral in 18 As part of the adoption of its scorecard, the World Bank result indicator linked to the resilient population outcome area is measured as the number of “beneficiaries with enhanced resilience to climate risks,” where enhanced resilience includes access to climate-resilient infrastructure, food, and water; enhanced climate disaster response; and support to livelihoods, education, financial mechanisms, and safety nets. A high-level vision indicator was also included and expressed as the “percentage of people at high risk from climate-related hazards.” A more compre- hensive discussion of the challenges related to the measurement of climate and disaster vulnerability is presented in the Poverty, Prosperity, and Planet Report. 26 Chapter 1  Taking Stock: Evolution and Composition of the DPF Cat DDO Portfolio nature, spanning infrastructure sectors, such as with other financing instruments and technical energy, water, urban development, transport, and support. DPF Cat DDOs support policy changes, industry, as well as social sectors, such as social yet their impact is often circumscribed by coun- protection and poverty reduction programs tries’ capacities as well as political economy and environmental management. Effective DRM constraints (IEG 2016). Thus, the design and imple- systems therefore require strong intersectoral mentation of DPF Cat DDOs have evolved over coordination and sustained engagement across time, drawing on operational learning and expe- government institutions. The policy dialogue that rience. As highlighted by IEG (2022), DPF Cat DDOs accompanies the preparation of DPF Cat DDOs have been most effective at catalyzing changes can help articulate a cohesive vision for DRM, when used in parallel with or coordinated along- bringing dispersed initiatives together under a side other instruments. DPF Cat DDOs are notably unified and comprehensive resilience agenda. most successful in advancing policy changes This offers an opportunity for policy makers to when: accompanied by targeted technical assis- better understand the cross-cutting impacts tance that strengthens national DRM capacity, of disaster and climate risks on the broader facilitates reform implementation, and supports economic and development priorities. In doing the achievement of policy objectives; and so, DPF Cat DDOs have often contributed to a shift accompanied by broader investment lending toward resilient development planning, moving operations that help translate policy efforts into from reactive disaster response to a more stra- concrete investments on the ground. Prior invest- tegic, forward-looking approach to proactively ment lending can also help to build the political managing disaster and climate-related risks. and technical knowledge of the country that is needed to support the design of DRM policies. DPF Cat DDOs nonetheless have limitations and should be used in parallel and in coordination 27 Chapter 2 Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 2.1. How DPF Cat DDOs Have Supported Countries in Advancing DRM Policy Reforms 2.2. A Structured Approach to Designing a Technically Sound DRM Policy Program Photo: Muddy floodwaters cutting through farmland and a rural village in South East Asia. © Teerasak1988. 28 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Based on a review of DRM policy programs a standalone sector focused solely on reac- supported through DPF Cat DDOs, this chapter tive disaster response. Instead, its integrative distills lessons learned and offers technical character cuts across multiple dimensions of insights to inform the design of future DRM development, ranging from infrastructure and policy programs. It begins by applying the World social protection to health, education, and fiscal Bank’s DRM framework to assess the distribution management. Recognizing this, DPF Cat DDOs patterns of DRM-related reforms supported under have fostered coordinated, multisectoral policy DPF Cat DDOs. This comprehensive framework dialogue to incentivize reforms that compre- enables a refined understanding of the types of hensively strengthen countries’ DRM systems. reforms that have been prioritized. The second A collaborative approach ensures that policy section introduces a structured approach to reforms are not only technically sound, but also designing DRM policy programs. This approach institutionally anchored and operationally rele- is not intended to guide the preparation of a vant. This cross-sectoral nature is reflected in specific World Bank financing instrument (such the wide range of DRM-related policy reforms as a DPF Cat DDO or a DRM DPF), but rather to supported through DPF Cat DDOs. serve as a practical tool for shaping DRM policy dialogue at the national level. Importantly, the To assess trends and distribution patterns of good practices presented in this chapter should the policy reforms supported by DPF Cat DDOs, not be interpreted as official guidance on DPFs the 249 PAs of the 60 DPF Cat DDOs approved as (including DPF Cat DDOs)—which are issued by of December 31, 2024, were classified using the the World Bank’s Operations Policy and Country World Bank’s DRM framework. This framework Services —nor as a substitute for those related 19 was proposed in “The Sendai Report” (Ghesquiere to the design of DPFs highlighted in IEG’s official et al. 2012) and is aligned with the Sendai learning products (IEG 2015). Framework for DRR (see figure 2.1). It comprises five thematic pillars plus one transversal cate- 2.1 gory on actions covering improvements to the DRM legal and institutional framework, which How DPF Cat DDOs Have have been added to cover all areas of engage- ment supported through DPF Cat DDOs in the Supported Countries in period of analysis.20 Beyond its use for assessing Advancing DRM Policy trends and distribution patterns of PAs, this DRM framework provides a standardized approach Reforms to map, track progress, and identify policy gaps across critical resilience-building dimensions. Given the inherently cross-sectoral nature Thus, it can be used to support the design of DRM of DRM, successful policy engagement policy programs that adopt a system- requires close collaboration across multiple perspective approach to enhance resilience. stakeholders. DRM should not be viewed as 19 The reader may refer to official documentation on the World Bank’s policy and directive for DPF. 20 This framework was also used in IEG’s report, “Reducing Disaster Risks from Natural Hazards: An Evaluation of the World Bank’s Support FY10-20” (IEG 2022). While we acknowledge that a PA can contribute to multiple pillars, a simplifying assumption was made, and each DRM-related PA was classified into a single pillar using predefined keywords and expert judgment. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 29 Figure 2.1. The DRM Policy Framework and Pillars Legal and Institutional DRM Framework (Transversal) Comprehensive policy reforms that establish or strengthen the legal and institutional foundations of disaster risk management (DRM) at national and subnational levels and across sectors. Tools and processes to understand disaster risks, which are essential for Risk Identification guiding risk reduction and enabling data-informed policy reforms Proactive policy reforms to reduce existing hazard risks, prevent new Risk Reduction ones, and enhance disaster resilience Preparedness efforts to ensure that communities and governments are Preparedness ready to act when a disaster occurs Financial Protection Strategies and instruments designed to reduce the financial impact of disasters on governments, businesses, and households Integration of resilience into recovery plans; prioritizing investments that Resilient Reconstruction reduce vulnerability Source: Original for this publication. The distribution of World Bank–supported DRM Reforms under the risk reduction pillar broadly policy programs across this framework unveils correspond to policy actions aimed at avoiding three main facts: the creation of new risks through the integra- tion of DRM into spatial and urban policies or First, DPF Cat DDOs have primarily supported public investment management processes or proactive measures to reduce exposure and reducing existing disaster risk through concrete vulnerability to disaster risk (figure 2.2). sectoral reforms (see section 2.2.1 for a detailed Figure 2.2. Number of PAs by DRM Pillar and IDA and IBRD Breakdown DRM Framework Risk Reduction Financial Protection DRM Risk Identification Preparedness Resilient Reconstruction Framework Risk 1% 3% Identification Risk 17% 21% 20% Reduction 22% Preparedness 1% Financial 9% Protection 21% 14% Resilient 40% Reconstruction 32% 0 20 40 60 80 100 Number of Prior Actions IDA IBRD Source: Based on World Bank data as of December 31, 2024. Note: DRM = disaster risk management; IBRD = International Bank for Reconstruction and Development; IDA = Interna- tional Development Association. 30 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements presentation). DPF Cat DDOs have also typically the difficulty to engage in a meaningful policy supported policy reforms in financial protec- dialogue on these aspects if no recent disaster tion against disasters, overarching legal and has occurred. institutional DRM framework, and prepared- ness pillars, while reforms related to resilient Since 2018, DPF Cat DDOs have increasingly reconstruction and risk identification, which are supported reforms related to the preparedness linked to sectoral policy reforms, have been less pillar, especially associated with IDA opera- developed. Notable differences exist between tions (figure 2.3). In contrast, overarching DRM programs supported by IDA and IBRD DPF Cat reforms—sometimes referred to as “first-gener- DDOs: Preparedness reforms are more prominent ation DRM reforms” that set up the institutional in IDA DPF Cat DDOs, comprising 21 percent of and legal frameworks for DRM through a broad supported policy actions compared to 14 percent DRM law—were more prominent in earlier DPF Cat in IBRD DPF Cat DDOs. Likewise, risk identification DDOs and have become less common in recent reforms amount to 9 percent of supported DRM ones. This trend is further confirmed by analyzing reforms in IBRD countries but are almost absent the distribution of PAs by DRM pillars between in IDA DPF Cat DDOs. Eventually, the relatively low the first and second DPF Cat DDOs (figure A.3, number of resilient reconstruction-related PAs appendix A). likely reflects the instrument’s ex-ante nature and Figure 2.3. Distribution of PAs by DRM Pillars Over Time DRM Framework Risk Identification Risk Reduction Preparedness Financial Protection Resilient Reconstruction 100% 80% Distribution of PAs by DRM pillars (%) 60% 40% 20% 0% ‘09 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 Fiscal Year Source: Based on World Bank data as of December 31, 2024. Note: DRM = disaster risk management; PAs = prior actions. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 31 Second, supported DRM policy programs have a range of legal instruments. In countries where been strategically focused on selected DRM DRM policy areas were still incipient, enacting an pillars and tailored to each country’s own risk overarching law that establishes broad norma- profile and DRM system. While DPF Cat DDOs tive and institutional arrangements has been a have often leveraged multiple areas of engage- critical step to drive policy change (for example, ment, the distribution of policy actions across establishing the mandatory incorporation of DRM pillars underscores a strategic prioritization. risk considerations into urban planning efforts Almost a quarter of the approved DPF Cat DDO through a territorial planning law or assigning programs comprise PAs that fall within three institutional responsibilities for emergency DRM pillars, with 93 percent of all DPF Cat DDOs management through an emergency manage- focusing on two to four DRM pillars (figure 2.4). ment act). In contrast, for policy areas with more Interestingly, as countries implement subsequent mature DRM-related regulatory structures in DPF Cat DDOs, there is an increase in the scope of place, support has more often been oriented DRM pillars addressed. On average, countries’ first toward concrete and targeted policy reforms and second DPF Cat DDOs target reforms encom- related to the enactment of technical norms or passing 2.8 pillars, while the third DPF Cat DDOs enforcement of their application. In such cases, expanded to cover 4.3 pillars. This suggests that reforms are typically underpinned by decrees as DRM systems mature and countries maintain a or lower-level ministerial actions (for example, a continuous policy dialogue on DRM-related policy decree putting in place a risk reduction program reforms, DPF Cat DDOs can more easily support for school infrastructure). This evolution suggests the mainstreaming of DRM considerations across that with DRM foundational frameworks in a growing number of sectors. place, there is a greater opportunity to advance more targeted sectoral reforms focused on reducing disaster risk and strengthening disaster Figure 2.4. Number of DRM Pillars Covered in preparedness and contingency planning. DPF Cat DDOs 25 The diversity of DRM reforms supported through the DPF Cat DDO instrument is particularly Number of DPF Cat DDOs 20 evident in Colombia and the Philippines, where successive operations have been in place for 15 over a decade. In both countries, this long-term policy engagement has helped maintain policy 10 momentum while facilitating a gradual shift 5 from broad enabling frameworks toward more concrete risk reduction measures at the sectoral 0 level. Although a comprehensive assessment of 1 2 3 4 5 results achieved lies beyond the scope of this Number of DRM Pillars note, progress across the different DRM pillars has Source: Based on World Bank data as of December 31, followed distinct trajectories in each country (see 2024. box 2.1). These examples illustrate that strength- Note: DPF Cat DDO = Development Policy Financing with a Catastrophe Deferred Drawdown Option; DRM = ening DRM systems is not a linear process, but disaster risk management. one shaped by each country’s specific risk context, institutional landscape, and deliberate Third, DPF Cat DDOs have advanced and policy choices. Beyond DPF Cat DDOs, the role strengthened DRM policy frameworks through of other World Bank instruments, in addition to 32 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Box 2.1. A Decade of DPF Cat DDO Engagement: Insights from Reform Trajectories in Colombia and the Philippinesa With four Development Policy Financing with a By contrast, early DPF Cat DDOs in Colombia Catastrophe Deferred Drawdown Option instru- supported decisive reforms in emergency prepared- ments (DPF Cat DDOs) each, Colombia and the ness and risk reduction. Policies and institutions for Philippines have maintained an active disaster disaster management (as opposed to broader risk risk management (DRM) policy dialogue with management) were established through the first DPF the World Bank for over a decade. Through these Cat DDO and served as a strong foundation for future successive DPF Cat DDOs, each country has progres- reforms. Risk reduction was addressed more directly sively strengthened its DRM policy and institutional through the second DPF Cat DDO, which supported framework. To provide a high-level assessment of the establishment of a robust policy framework for this evolution, the distribution of supported reforms territorial planning, mandating the identification and across their respective DRM pillars is shown in figure zoning of hazard and risk areas, along with the defi- B2.1.1. It illustrates how Colombia and the Philippines nition of specific mitigation measures as part of the have followed distinct reform trajectories in land use planning review process. The creation of an advancing their DRM frameworks.  overarching national DRM system was also supported under the second DPF Cat DDO, accompanied by In the Philippines, the DRM reform trajectory has institutional measures to ensure that a national coor- been anchored in a strong legal and institutional dinating unit was in place. This laid the groundwork for foundation established with the enactment of the a swift evolution toward more targeted and technical 2010 Disaster Risk Reduction and Management policy reforms. Subsequent DPF Cat DDOs supported (DRRM) Act. This comprehensive legislation, supported a wide range of risk reduction reforms through by the first DPF Cat DDO, created an enabling envi- sector-specific regulations in transport, housing, ronment for mainstreaming DRM across development and tourism. These reforms enabled risk reduc- planning and public finance. Subsequent DPF Cat tion initiatives to penetrate deeply across sectors, DDOs and a Disaster Risk Management Development demonstrating the flexibility and depth of Colombia’s Policy Lending (DRM DPL) built incrementally on this evolving DRM strategy. Finally, the most recent DPF foundation by expanding DRM integration into sectoral Cat DDOs built on the DRF strategy approved earlier and local planning frameworks and enhancing in the process, advancing access to risk financing financial protection. Progress under the financial instruments and strengthening the quantification and protection pillar was particularly rapid, with a disaster management of disaster-related contingent liabilities. risk financing (DRF) strategy in place that increased coverage against catastrophic events and protected In a nutshell, both countries have pursued reform fiscal accounts. The occurrence of major disasters trajectories that simultaneously expanded support during this period also prompted progress under the to new DRM pillars and deepened reforms within resilient recovery framework, with the adoption of previously addressed ones. This evolution reflects a recovery and reconstruction frameworks effectively steady progression from broad institutional reforms linked to the financial protection strategy to incentivize toward increasingly concrete and sector-spe- implementation. Nonetheless, the incorporation of cific policies and regulations. Many of these policy concrete risk reduction measures into urban planning advances have been facilitated by DPF Cat DDOs, and infrastructure, particularly in schools and health though they are ultimately shaped by each country’s systems, was only achieved under the fourth DPF Cat experience with past disasters, institutional context, DDO. Similarly, support for reforms under the emer- policy priorities, and exposure to natural hazards. gency preparedness pillar emerged only toward the More broadly, these two reform trajectories illustrate end of the period, suggesting more limited advance- the diversity of paths that can be followed to build ment in these two pillars.  disaster and climate resilience. a The fourth Cat DDO in Colombia was approved in 2025, following the cutoff date for the portfolio trends analyzed in the preceding section of this report. Major achievements of these policy engagements have been documented in various World Bank internal documents (such as the ICR and ICRR for each operation) or in public documents such as IEG 2022. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 33 Box 2.1. (cont.) Figure B2.1.1. DRM Policy Reforms Supported in Colombia and the Philippines Colombia 1st Cat DDO 2nd Cat DDO 3rd Cat DDO 4th Cat DDO (P113084) (P113084) (P176650) (P181256) DRM Policies National DRM policy and Approval of DRR and National DRM Plan updated to promote system approved and DRM and Institutions coordination unit created Climate Adaptation Policy participation of local communities Improved risk Development of a Risk identification, methodology to create an Establishment of rules and processes for climate change Identification monitoring, and inventory of settlements in information systems awareness high-risk areas Deforestation Control Policy approved Increased resilience of road infrastructure through technical Land use plans must identify Inclusion of DRR in Increased capacity to develop resilient regulations Risk Reduction territorial development hazard and risk areas and housing and land use planning define specific mitigation plans Promotion of nature-based solutions measures Green Road Infra. Guidelines and Roads and DRM plans as part of the Tourism Institute DRM plan approved Sectoral Plan Strengthened COVID-19 Response Program approved Adoption of programs on Hospitals Resilient to Health Emergencies and Preparedness policies and institutions Disasters and Emergency Medical for disaster Sectoral guidelines to Prepare and management Respond to Health Effects of La Niña Team Global Initiative Disaster, Epidemic and Pandemic Risk Authorize the offering of parametric Financing Strategy updated insurance in national territory and Financial National catastrophe access for subnational entities to risk financing Sovereign Green Bond Framework Protection strategy adopted developed financial instruments in case of disaster Medium-Term Fiscal Framework Improved methodology to quantify includes disaster risk considerations disaster-related contingent liabilities Resilient Reconstruction Philippines 1st Cat DDO 2nd Cat DDO DRM DPL 3rd Cat DDO 4th Cat DDO (P125943) (P155656) (P171440) (P177125) (P180585) Strengthen DRM DRM Policies institutional and Institutions capacity through DRRM Act Specific allocations MDAs use integrated hazard National and local Risk provided for risk and risk analysis in physical governments establish Identification resiliency programs to planning and evidence- baseline risk data to inform develop risk information based policy making DRM interventions Resilience measures Guidelines for Climate Risk Vulnerability Philippine Development The government has integrated in health resilient urban Mainstream DRR Assessment adopted to Plan updated, revising operationalized an infrastructure planning into development integrate risk management Risk Reduction planning through the investment earthquake resiliency in the Provincial Commodity Resilience programming strategy program for Greater Metro Risk-informed DRR Action Plan Investment Plans measures to prioritize DRM and DRR Manila Area school infra. (agriculture) integrated in local investment program land use plans Guidelines issued for Strengthened community- Schools mandated to develop Preparedness Emergency Cash Transfer based DRM-related education contingency plans program for disaster recovery and training program Better manage DRRM Fund can be used Improved tracking and Financial the government’s to pay for insurance prioritization of climate premiums in key sectors Protection fiscal exposure to change adaptation and DDR disasters DRF strategy adopted spending in the budget Disaster rehabilitation and Disaster rehabilitation and Resilient recovery planning framework recovery plans are required Reconstruction adopted for national and to request funding from the local governments National DRRM Fund Source: Original for this publication. Note: Cat DDO = Catastrophe Deferred Drawdown Option; DRM = disaster risk management; DRM DPL = Disaster Risk Management Development Policy Lending; DRR = disaster risk reduction; DRRM = disaster risk reduction and management; MDA = Ministry, Department or Agency. 34 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements support from other development partners, was align with national priorities and be grounded in also critical in building resilience. In both cases, the country’s risk profile, political landscape, and extensive trust-funded technical assistance institutional capacities. programs—underpinned by robust data and analytics—were mobilized to quantify disaster risk, assess the costs and benefits of action, commu- 2.2.1. Review potential areas of nicate potential impacts, and generate the engagement through a DRM political and technical buy-in required for long- diagnostic term DRM. Similarly, investment lending played a complementary role by deepening policy reforms As a first step, conducting a DRM policy at the sectoral level and fostering the relation- diagnostic allows governments and their ships, trust, and technical capacity needed to development partners to understand the translate high-level policy shifts into tangible DRR strengths, weaknesses, challenges, and initiatives on the ground. opportunities of a country’s DRM policy and institutional framework. The objective of this 2.2 diagnostic is to screen all potential areas of engagement that could be supported to identify A Structured Approach to policy gaps that hinder disaster resilience– building efforts nationwide (the “resilience gaps”) Designing a Technically and identify reforms that could address these Sound DRM Policy gaps. By following the framework proposed in figure 2.1 of the previous section, the diagnostic Program not only enhances understanding of the poten- tial policy reforms that could strengthen the DRM This section outlines a structured, three-step framework, it also helps identify the most relevant approach to support the design of technically counterparts for DRM policy dialogue. The ques- sound DRM policy programs. The proposed tions presented in table 2.1 can help structure approach involves reviewing the country’s existing this diagnostic. They should be addressed for DRM framework to identify major policy gaps each policy area or thematic area of the DRM in disaster and climate resilience, articulating framework.21 potential DRM-related policy reforms with their expected outputs and outcomes that contribute Given the strong interconnection between to enhanced resilience, and prioritizing and climate change and disaster risk, climate- sequencing these reforms to sharpen the policy related policies can also contribute to program’s content and ensure that the supported advancing DRM objectives. Assessing progress policy package is effective and coherent, maxi- on climate adaptation and mitigation efforts— mizing preparedness and resilience impacts. particularly those that reduce exposure and While this section discusses a structured vulnerability—should form an integral part of the approach, the specific content of any DRM reform DRM diagnostic. Box 2.2 illustrates practical ways program must remain context specific. There is to incorporate climate resilience considerations no one-size-fits-all solution for DRM-related policy throughout the diagnostic process. reforms. The selected policy package should While this chapter provides guiding questions to support the DRM policy diagnostic, it does not constitute a stan- 21 dardized methodological tool for cross-country benchmarking or comparative assessment. Rather, it is intended as a flexible, qualitative framework to support policy dialogue and reform prioritization within national contexts. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 35 Table 2.1. Indicative Questions to Help Conduct a DRM Diagnostic Topic Questions Assess the DRM system in place What is the status of the legal and regulatory framework (for example, laws, decrees, res- olutions, and orders) governing each policy area of the disaster risk management (DRM) Status framework (for example, early warning systems, fiscal risk management, and so on)? Are the policy documents technically sound? How do they compare with similar docu- ments in peer countries? What institutions oversee each policy area? Institutions Is there any coordination mechanism between the relevant stakeholders of the policy area? Are all the required actors included? What are the main barriers limiting progress under each policy area to resilience-building efforts? Barriers Are these barriers due to an inadequate institutional or legal framework (for example, lack of enforcement or insufficient technical or financial resources)? What factors drive disaster risk in the country and how could they evolve in the coming Future decades due to climate change, demographic and urbanization trends, or other factors? Is the DRM system prepared for these anticipated evolutions? Explore policy reforms that could help address disaster resilience gaps What institutional or policy reforms could help overcome these barriers? Are there exam- Solutions ples of peer countries that have addressed a similar issue through policy reforms? How would these reforms align with the overarching national planning document? What are the main priorities of the government and how do they relate to each DRM policy area? For example, is the strengthening of the territorial and urban planning legal and institutional framework a priority for the government? Would this reform enhance Priorities the capacity to reduce risk? What is the level of political appetite to promote selected DRM-related policy reforms in the near term? How feasible are the reforms from a political standpoint (for example, composition of parliament)? What are the main activities supported by other government ministries or sector teams engaged in areas related to each thematic area? For example, social ministries or agen- cies can provide insights into the policy gaps impeding the development of adaptive social protection, and ministries in charge of water resources management might have Cooperation preidentified policy reforms to promote an integrated water resources management system that contributes to reducing flood and drought risks. What are other donors and development partners doing to support DRM policy actions in the country? Source: Original for this publication. 36 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Box 2.2. Considering Climate Change as Part of the Review of the DRM Framework Climate change is reconfiguring disaster risks harder to assess, these compounding effects should through more frequent and severe extreme be acknowledged in traditional risk management events and the emergence of gradual and new approaches as they can generate cascading hazards. Consequently, climate change should economic, social, and fiscal effects that are greater be integrated into DRM-related policy reforms by than the sum of individual hazards. explicitly accounting for these evolving threats in risk assessments, policies, strategies, guide- Given the uncertainties in localized climate lines, and actions. This includes evaluating shifts in projections, a phased approach to integration is hydrometeorological hazards, the emergence of recommended. Countries can progressively embed new threats, and their impact on the exposure and climate considerations into policies and regulations, vulnerability of populations, assets, and ecosystems. updating planning tools as data availability and These considerations can be incorporated through technical capacity improve. For example, in infra- methods such as climate projections, sensitivity structure planning, applying climate-resilient design analyses, scenario-based planning, and stress standards that account for future temperature, testing, ensuring policies are adaptive and respon- precipitation, and sea level changes can ensure long- sive to evolving climate risks. Table B2.2.1 presents term sustainability while allowing for adjustments as examples of how climate change adaptation can projections evolve. Similarly, adaptive social protec- be integrated into the DRM pillars. Climate change tion programs can be designed to expand coverage also has a compounding effect on disaster risk and in response to climate-induced shocks. Approaches increases the likelihood that extreme events occur such as decision-making under deep uncertainty simultaneously, sequentially, or interactively, thereby provide valuable tools to account for uncertain future amplifying their overall impact. Although they are conditions and make robust policy choices. Table B2.2.1. Examples of How Climate Change Adaptation Can Be Integrated into the DRM Pillars DRM Pillar Examples Support coordination mechanisms between disaster risk management (DRM) and Legal and Institutional climate change adaptation at all levels led by agencies with convening power DRM Framework and integrated planning frameworks. Include climate projections and/or scenario analysis into climate risk assess- Risk Identification ments. Embed incremental approaches into policies and regulations for the inclusion of climate change. Risk Reduction Develop guidelines for incorporating climate resilience measures into public infra- structure. Develop climate-resilient building codes. Provide contingency planning for climate impacts on regions and sectors (not Preparedness only disasters) (for example, impacts of heatwaves on electricity demand). Revise adaptive social protection for changes in population exposed. Tap into and coordinate access to climate adaptation resources. Financial Protection Consider climate change impacts in contingent liabilities. Build back better and more resilient: Combine low-regret actions with options for Resilient Reconstruction future adjustments. Source: Original for this publication. Note: DRM = disaster risk management. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 37 Integrating gender considerations across each 2.3 illustrates practical ways to embed gender of these six DRM pillars is critical to ensure that considerations into DRM policy and program supported policies are inclusive and effective. design, helping to address existing inequali- Gender shapes how risks are experienced and ties and improve the impact of the supported how individuals access resources, services, and reforms. support before, during, and after a disaster. Box Box 2.3. Integrating Gender Considerations across DRM Policy Areas Gender inequality significantly intersects with are met. A gender-responsive approach also leads disaster risk, affecting how individuals and to more targeted resource allocation, making sure communities experience and respond to crises. that financial protection tools like cash transfers or Existing gender disparities, such as unequal access insurance are accessible to female-headed house- to resources, education, decision-making, and holds or informal workers. This practical integration public services, are often exacerbated during and helps reduce inequalities, makes disaster responses after disasters. These inequalities make women, faster and more equitable, and ultimately builds gender-diverse individuals, and marginalized groups stronger, more resilient communities where no one is more vulnerable, not just in the immediate after- left behind. math of a disaster, but also in the recovery phase. To effectively address these disparities, disaster risk Moving forward, a more deliberate focus on gender management (DRM) policies and programs must offers an opportunity to strengthen both the quality adopt a gender-responsive approach, integrating and impact of supported DRM policies. Gender influ- gender equality throughout disaster preparedness, ences how individuals access information, resources, response, and recovery. and services before, during, and after a disaster. Without accounting for these differences, policy Integrating gender equality into DRM policy measures, however well-designed, may fall short in frameworks is vital for ensuring that disaster reaching the full population or in supporting recovery management is effective for everyone, especially equitably. Several Development Policy Financing with for women and marginalized groups who often a Catastrophe Deferred Drawdown Option instru- face greater vulnerabilities. By including gender ments (DPF Cat DDOs) already demonstrate how considerations in risk assessments, early warning small design adjustments—such as using sex-disag- systems (EWS), and more broadly, decision-making gregated data, updating social registries, or tailoring processes, DRM policies can address specific needs financial instruments—can improve both inclusion and barriers faced by these groups. For example, and policy performance. To promote early and ensuring women’s participation in planning and consistent integration of gender in DRM policy design, response ensures that their unique needs, such as gender considerations should be included as core access to shelters, safety, and recovery support, elements of the DRM policy diagnostic (table B2.3.1). 38 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Box 2.3. (cont.) Table B2.3.1. Integrating Gender across the DRM Policy Areas DRM Pillar Description Legal and institutional frameworks should promote gender equality by mandating the in- Legal and tegration of gender considerations in disaster risk management (DRM) policies, plans, and Institutional DRM institutions—ensuring representation, participation, and accountability mechanisms that Framework address the distinct needs and roles of all gender groups. Gender-sensitive risk identification should ensure that gender-specific vulnerabilities are Risk Identification captured in disaster risk assessments, considering how different gender groups experience and cope with disasters. Gender integration in DRR should ensure that strategies address the specific vulnerabilities Risk Reduction of women and marginalized groups, helping to reduce their exposure to risks. Gender-sensitive preparedness should ensure that all gender groups, especially vulnera- Preparedness ble ones, have access to resources, information, and leadership opportunities to effectively respond to disasters. Financial protection tools should ensure that all gender groups, particularly those who are Financial vulnerable or economically marginalized, have equal access to financial resources before, Protection during, and after a disaster. Gender-sensitive resilient reconstruction should ensure that postdisaster recovery efforts Resilient actively include women and marginalized groups, addressing their specific needs and Reconstruction promoting long-term gender equity in the rebuilding process. Source: Original for this publication. Note: DRM = disaster risk management; DRR = disaster risk reduction. Description of the DRM pillars and examples of analysis, each pillar is also accompanied by a policy reforms supported by past DPF Cat DDOs: set of guiding questions aimed at unpacking its key components and identifying opportunities To facilitate the assessment of the DRM policy for further potential DRM policy reforms. These and institutional framework, this section questions also explore cross-cutting issues such presents technical guidance to carry out the as climate change adaptation and gender. diagnostic, structured around the six DRM pillars. Where relevant, these pillars are further While the following paragraphs discuss each broken down into thematic areas to provide pillar separately, the design of a sound DRM greater granularity and reflect the complexity policy program requires a system-perspec- of country contexts. Illustrative examples of tive approach. For instance, financial protection policy reforms are included under each pillar mechanisms should be designed in tandem to showcase the types of actions govern- with risk reduction and preparedness reforms. ments have undertaken to strengthen their DRM Focusing on a single dimension (like disaster systems, drawing from the experience of DPF contingency funds) without reinforcing the Cat DDO operations across all regions. While emergency preparedness and response (EP&R) not exhaustive, these examples reflect a range system may leave countries underprepared. The of institutional, legal, and regulatory measures proposed diagnostic should thus be systemic to that countries have adopted. To support deeper help identify potential reform packages that cut Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 39 across silos. The diagnostic should also acknowl- this is the case, even if the diagnostic might be edge that the main barrier to resilience might not helpful to identify policy gaps, addressing them be a policy one. Gaps in funding and institutional by themselves is unlikely to strengthen resilience; capacity commonly hinder efforts to enhance it is equally essential to identify the necessary resilience to climate and disaster risks. When complementary actions. Pillar 1. Legal and Institutional DRM Framework This pillar encompasses comprehensive efforts. Recent reforms such as those in Costa policy reforms that establish or strengthen the Rica, The Gambia, and Tuvalu, increasingly legal and institutional foundations for DRM at integrate climate change adaptation, gender national and subnational levels and across equality, and community-level engagement into sectors. These reforms are typically laws, high- DRM frameworks, reflecting a shift toward more level strategies, or plans aimed at mainstreaming inclusive and proactive risk management. DRM throughout different sectors, ensuring that disaster risk considerations are integrated Guiding questions for a DRM diagnostic into national development planning and deci- sion-making processes. They seek to create a Ì What national DRM/DRR laws exist, and robust legal and institutional framework that how clearly do they define institutional enables effective coordination and implementa- mandates and responsibilities? tion of DRM policies across various government Ì What national DRM/DRR strategy or policy agencies and sectors. However, policy reforms documents are in place, and how are under this pillar may face challenges in their they being implemented? efficacy if they do not lead to significant changes Ì Which institutions are responsible for and remain merely approved documents with coordinating DRM at the national level, good intentions, rather than driving concrete and what are their institutional capacities actions. in terms of staffing, technical expertise, and financial resources? Ì What specific climate change adaptation Thematic Area 1.1: DRM Policies and Institutions policies, plans and initiatives exist (e.g., climate change law, National Adaptation Many countries have established comprehen- Plans)? How do they relate to DRM policy sive DRM policies and institutional frameworks documents? to strengthen risk governance and resilience. Ì How does the DRM policy framework inte- These reforms often include the adoption of grate climate resilience and adaptation national DRM laws, policies, or strategies that considerations? define institutional mandates, clarify roles and Ì Is there any coordination mechanism responsibilities, and promote coordinated action between DRM and climate change across sectors and levels of government as in adaptation policy and institutional Colombia or Panama. In some cases, dedicated frameworks? DRM authorities or interministerial bodies have been created to lead and harmonize national 40 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Thematic Area 1.2: Mainstreaming DRM into sector-specific DRM plans. Other relevant reforms National Development Plans include establishing institutional mechanisms to coordinate risk-informed development. Countries are increasingly integrating DRM into national development planning to ensure that Guiding questions for a DRM diagnostic climate and disaster risks are systematically addressed across sectors and levels of govern- Ì How is DRM incorporated into the coun- ment. For example, Costa Rica has embedded try’s overarching National Development DRM priorities within its national development Plan or equivalent strategy? plan, while Madagascar has adopted planning Ì In what ways is the integration of DRM guidelines that explicitly incorporate risk consider- considerations into sectoral planning ations. Guatemala has focused on strengthening documents coordinated at the central the capacity of planning agencies to assess and level? manage risks, and Honduras has established technical units within key ministries to develop Pillar 2. Risk Identification Risk identification forms the backbone of an Several countries have also prioritized reforms to effective DRM system. It entails the system- improve access to and coordination of geospa- atic collection, analysis, and dissemination of tial and disaster-related data. In Sri Lanka, a data on hazards, exposure, and vulnerability national steering committee was established to to inform policy and investment decisions. oversee the common use and sharing of spatial Governments have advanced this agenda data, while the Dominican Republic undertook a through reforms aimed at strengthening tech- comprehensive overhaul of its geospatial data nical and institutional capacities to produce, governance framework, adopting international manage, and utilize risk information. For instance, quality standards, institutionalizing cooperation Colombia enacted legislation mandating the across agencies, and elevating the mandate of development of a national inventory of settle- its geodetic authority. Mauritania has created ments in high-risk areas, while Guatemala has an observatory to monitor coastal ecosys- integrated data from its national meteorological tems, and the Seychelles has institutionalized service and vulnerability assessments to guide a historical disaster loss database accessible the prioritization of public investments. Similarly, to all stakeholders. These reforms illustrate a in the Philippines, national and local agencies growing recognition that risk information must are now required to establish baseline data on not only be technically sound, but also institu- disaster and climate risks as part of the country’s tionalized, openly available, and embedded in overarching DRM strategy. decision-making processes to drive more resilient development outcomes. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 41 Guiding questions for a DRM diagnostic Ì Which institutions are responsible for risk identification activities and conducting risk assess- ments? What is their level of technical capacity? Are these mandates formalized through legally binding instruments? Ì What are the country’s main climate-related risks, and how are they expected to evolve under different climate change scenarios, including extreme events, high-frequency/low-impact events, and slow-onset changes? Ì What national risk assessments or disaster risk profiles exist for the key hazards the country faces? To what extent do they account for the potential impacts of climate change? Ì What systems or databases are in place to record historical disaster impacts, such as damages and fatalities? Ì How is risk information—such as hazard maps and vulnerability data—made publicly accessible? Ì In what ways is risk information shared with relevant stakeholders, and how is it used in decision-making? Ì What protocols or mechanisms are in place to ensure that risk assessments are updated regularly? Ì Have gender-specific risks related to disasters, health emergencies, and systemic crises (e.g., pandemics, climate change) been identified? Ì Do assessments use gender-disaggregated data to understand how men, women, and gen- der-diverse groups are differentially affected in terms of exposure, mortality, or livelihood impacts? Ì Are gender-based barriers considered in vulnerability mapping, particularly in access to essen- tial services like healthcare, information, and shelters during disasters? Pillar 3. Risk Reduction The risk reduction pillar centers on advancing with strong political commitment and institutional strategic reforms that minimize existing mechanisms to enable and enforce the use of vulnerabilities and prevent the creation of new risk data in development planning. risks. A key focus is the integration of risk consid- erations into policy and regulatory frameworks across sectors, such as infrastructure, housing, Thematic Area 3.1: Territorial and Urban Planning water, transportation, or education, ensuring that risk is factored into both development planning Within this pillar, territorial planning stands and everyday decision-making. These reforms out as a critical entry point for embedding DRM are inherently cross-sectoral and must be under- into spatial and urban policy. Many countries pinned by robust risk information systems, as have enacted legal and regulatory reforms to outlined in the risk identification pillar. Achieving strengthen this integration. For instance, Colombia meaningful progress in this area requires a has mandated the use of hazard and risk zoning coordinated approach involving a broad range in land use planning instruments, while Kenya and of stakeholders, including planning authorities, Malawi have adopted national land use and urban sectoral ministries, and subnational governments, development policies that prioritize resilience. In 42 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements the Philippines, local governments are required to have advanced reforms to embed disaster incorporate climate and disaster risk measures and climate resilience into public investment into land use plans, supported by technical guid- systems through regulatory, planning, and tech- ance from national agencies. Similarly, Bhutan’s nical measures. Costa Rica and the Dominican Thimphu Design Code and Benin’s urban planning Republic now require risk screening and disaster law exemplify efforts to institutionalize risk-informed risk analyses for national investments, while the planning practices at the city level. These reforms Philippines has revised its investment program- demonstrate growing recognition of the role that ming strategy to prioritize DRR. Peru has taken territorial planning plays in shaping safer, more measures to improve the design of flood protec- resilient communities and guiding sustainable tion programs by setting minimum standards development pathways. In practice, these reforms for the preparation of preinvestment studies for are often directly linked to fiscal decentralization, related public investments projects. Similarly, as local policy makers face complex trade-offs in Grenada and Zambia have introduced regulatory their adoption and implementation. For instance, changes to incorporate climate resilience criteria rapid urban expansion may increase the local tax into the selection, design, and management of base through property revenues, while efforts to public and public-private investment projects. promote safer urban settlements may constrain These efforts enhance the quality, sustainability, revenue collection unless complemented by more and impact of public spending in the face of advanced instruments such as land value capture. growing climate and disaster risks. Fiscal decentralization and subnational fiscal capacity should therefore be considered key entry Guiding questions for a DRM diagnostic points for developing an integrated approach to resilient urban and territorial planning. Ì What requirements exist for integrating disaster and climate risk analysis into public investment planning and pub- Guiding questions for a DRM diagnostic lic-private partnerships? Ì How are DRM considerations integrated Ì How does the national public investment into land-use planning and urban devel- system evaluate and prioritize risk-in- opment regulations? formed investments? Ì What zoning regulations exist for high-risk Ì What guidelines or standards exist for areas, and how are they enforced? climate-proofing infrastructure, and how Ì How are local governments required are they applied? and/or supported to incorporate hazard Ì Do environmental impact assessments and risk data into local development systematically consider climate and planning? disaster risks? Thematic Area 3.2: Public Investment Thematic Area 3.3: Sector-Specific Risk Reduction Management Measures Public investment management is critical These are concrete sectoral reforms aimed at for reducing disaster risk by ensuring that reducing disaster risk, taking diverse forms infrastructure and development projects depending on the context. They include the are risk-informed from the outset. Countries updating of sector-specific legislation, adoption Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 43 of mandatory safety standards, and creation management. Other reforms focus on protecting of oversight bodies, financing mechanisms, or public infrastructure like schools and hospi- asset-management systems. Risk reduction is tals or leveraging environmental and natural increasingly mainstreamed into sectors such as resource regulations to promote nature-based housing, transport, energy, and water through, solutions for risk reduction and climate change for example, revisions to building codes, climate- adaptation. This diversity reflects the need resilient road design, strengthened grid infra- to tailor measures to each sector’s specific structure, or improved watershed and floodplain characteristics. Guiding questions for a DRM diagnostic Ì Are there sector-specific standards in place for disaster-informed design and construction of public infrastructure (e.g., roads, bridges, energy systems)? Ì Are there dedicated financing mechanisms for maintenance and retrofitting existing infrastructure? Ì How are DRM/DRR strategies integrated into the operations of key sectors like transport, agricul- ture, and energy? Ì How does the policy and institutional framework for water resource management and/or water supply and sanitation contribute to managing water-related risks (i.e., floods and droughts)? Ì What environmental policies support risk reduction, including those focused on ecosystems like watersheds or coastal zones? Ì Are gender-specific vulnerabilities considered in DRR strategies, including climate resilience and disaster preparedness? Ì Are gender-sensitive infrastructure and housing designs (e.g., safe shelters, accessible infra- structure) included in DRR efforts? Ì Do DRR plans actively involve women, informal workers, and marginalized groups in their design and implementation? Pillar 4. Preparedness Preparedness is a crucial component of DRM, Since fiscal 2018, DPF Cat DDOs have demon- recognizing that while risks can be mitigated, strated a more sustained approach to they can never be fully eliminated. Preparedness supporting preparedness-related policy efforts focus on ensuring that communities and reforms. This focus has strengthened over time, governments are ready to act when a disaster with more than 20 percent of the PAs in DPF Cat strikes. This includes setting up early warning DDOs approved between fiscal 2020 and fiscal systems (EWS) that not only detect hazards but 2022 addressing this area (highlighted in yellow also trigger appropriate responses, strengthening in figure 2.3). To better understand this trend, PAs local capacities to handle emergencies, and forti- related to the preparedness pillar were further fying social protection systems to be responsive to classified into: EWS, emergency preparedness shocks, ensuring that the population is supported and response, and adaptive social protec- before, during, and after disasters. tion (figure 2.5). The growing support for these 44 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Figure 2.5. PAs in the Preparedness Pillar (as % of total FY’s PAs) Early Warning Systems Emergency Preparedness & Response Adaptive Social Protection 35% 30% PAs per thematic area (as % of total PAs) 25% 20% 15% 10% 5% 0% ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 Fiscal Year Source: Based on World Bank data as of December 31, 2024. three areas underscores the strategic role of and Meteorology as the national EWS provider. the DPF Cat DDO in advancing policy reforms on Countries such as Malawi and the Seychelles preparedness, particularly in IDA countries where have modernized their DRM and meteorological institutional frameworks for emergency manage- policies, ensuring integration of EWS into broader ment remain weak or fragmented. disaster preparedness and contingency plan- ning. To improve outreach and effectiveness, Nepal has leveraged public-private partnerships Thematic Area 4.1: Early Warning Systems (EWS) with telecom providers to expand early warning communication, while also strengthening health Policy reforms across countries have surveillance through updated notifiable disease increasingly focused on enhancing EWS as lists. Similarly, Honduras and Vanuatu have a cornerstone of disaster preparedness and advanced outbreak alert systems to strengthen risk reduction. Governments have undertaken their health surveillance systems. These policy institutional reforms to establish or strengthen reforms demonstrate a growing recognition of national hydrometeorological services with EWS as essential public infrastructure and reflect clearer mandates, such as Panama’s creation of a shift toward institutionalized, multisectoral, an autonomous hydromet agency and Bhutan’s and technology-enabled approaches to risk designation of the National Center for Hydrology communication. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 45 has expedited regulatory processes to ensure Guiding questions for a DRM diagnostic the timely customs clearance of essential goods during crises. At the local level, countries such as Ì What EWS policy and institutional frame- Honduras have promoted municipal emergency works are in place, and how effective are planning. Collectively, these reforms illustrate a they to reach at-risk communities in a growing commitment to building robust, proac- timely manner? tive EP&R systems capable of addressing both Ì What capabilities do the national meteo- sudden- and slow-onset disasters. rological or hydrometeorological service have for forecasting hazards, and how are forecasts disseminated? Guiding questions for a DRM diagnostic Ì Are EWS designed to provide relevant information to all social groups in the Ì What is the country’s institutional struc- community, especially those with limited ture for emergency management, and access to technology or mobility? how is coordination at the sectoral and territorial levels achieved? Ì How effectively does the EP&R sys- tem respond to disaster-related Thematic Area 4.2: Emergency Preparedness and emergencies? Response (EP&R) Ì What contingency plans exist for key haz- ards, and how are they maintained and Countries have advanced a wide range of operationalized? policy reforms to strengthen EP&R systems, Ì How often are emergency simulations focusing on institutional coordination, plan- or drills conducted, and how are results ning, and operational readiness. Several used to improve preparedness? governments, including Mauritania and Tuvalu, Ì Do emergency preparedness plans have clarified institutional mandates through incorporate gender-sensitive mea- unified frameworks and standard operating sures, such as gender-based violence procedures to streamline emergency decla- prevention, safe shelters, and women’s rations and response protocols. Others, like El specific needs during evacuation and Salvador, have prioritized strategic planning by displacement? updating national contingency plans across Ì Are women and marginalized pop- key sectors. Health emergencies have received ulations actively involved in disaster particular attention, as multiple countries have preparedness planning, particularly in developed or approved pandemic preparedness community-level decision-making? and health emergency response plans. Tonga 46 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Box 2.4. Declaring a State of Catastrophe: Key Elements of an Effective Disaster Response Major disasters and public health emergencies assessment of whether these systems function often require governments to adopt extraordinary in practice. In various contexts, political, economic, measures at short notice, such as deploying security and historical dynamics may discourage govern- forces, accelerating procurement procedures, or ments from issuing formal declarations. For example, reallocating public funds. These actions, while neces- in countries with histories of authoritarianism or sary, must be grounded in clear legislation to ensure military rule, activating emergency powers can legitimacy, efficiency, and accountability. provoke concerns about civil rights and democratic integrity. In some countries, concern over impacts Most countries possess some form of legisla- on tourism or foreign investment might lead author- tion to declare a state of exception in the event ities to avoid declaring emergencies, even amid of catastrophes or public health crises.a In some significant disaster impacts. Consequently, govern- countries, specific legislative instruments allow for ments may respond to disasters through informal the declaration of a “state of catastrophe,” offering a practices or ad-hoc administrative measures that flexible but legally sound basis for targeted emer- lack an overarching legal framework and might gency action. The legal framework for declaring undermine crisis response efforts. Reviewing both a state of emergency may be fragmented across the legal instruments authorizing the declaration of different legal texts. Provisions may be found in: a state of exception and recent emergency response constitutions, which provide the legal foundation for experiences provides insight into the extent to which exceptional measures; disaster risk management existing legislation supports and aligns with actual (DRM) and civil protection laws, which may char- operational practices. acterize the declaration of a state of emergency in response to disasters and define the criteria, respon- Where frameworks are weak, fragmented, or not sible entities, and scope of emergency measures; effectively used, legislative or institutional reform public health legislation, which may define triggers should be considered as a strategic policy reform for states of health emergency due to epidemics, within the broader DRM agenda. Establishing legal pandemics, or biosecurity threats; general emer- frameworks to issue timely and relevant declarations gency powers acts, such as “civil contingencies acts” of emergency is essential for both improving national or “emergency powers acts”; and sector-specific systems for crisis response and activating contin- regulations, especially for slow-onset disasters like gent financing instruments such as the DPF Cat DDO. droughts, which may trigger declarations of hydric Table B2.4.1 summarizes key elements of a robust or agricultural emergency under water or land-use legal framework for declaring a state of exception. laws. Strengthening the legal basis for emergency decla- rations can serve as a critical entry point for broader Ensuring that the appropriate mechanisms DRM reforms, advancing the preparedness pillar to declare a state of catastrophe are in place while also reinforcing governance and transparency. requires more than a legal review; it demands an a Following Agamben (2005), “state of exception” refers to a temporary legal condition or framework that allows a government to deviate from the rule of law in response to extraordinary circumstances. States of exception can be issued in response to disasters, pandemics, epidemics, armed conflict, or other significant threats to public order or national security. States of exception can thus refer to distinct legal cases, such as state of emergency, state of siege, state of war, or even martial law. From a legal perspective, these states of exception all have in common that they are used to ensure that the deviation from normal rules is lawful. The terminology used for states of exception due to catastrophes varies across countries, with com- mon terms including “state of emergency,” “state of calamity,” “state of catastrophe,” “state of sanitary catastrophe,” and “state of disaster.” Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 47 Box 2.4. (cont.) Table B2.4.1. Key Elements of a Robust Legal Framework for Declaring a State of Exception Element Description Defines the types of events that justify a state of exception (for example, disasters, Hazard coverage pandemics, and explosions) and the institutions responsible for monitoring hazards and recommending declarations Specifies who can declare the state of exception (for example, president or council of Declaration authority ministers), which legal instruments are used (for example, decree or resolution), and the and process institutional responsibilities during the emergency Establishes predefined conditions for triggering declarations (for example, number of Triggering criteria fatalities, geographic scope, economic losses, and severity of impact) Details the spatial extent of the declaration, measures to be implemented, duration of Scope and duration the emergency status, and procedures for extension (for example, requiring legislative approval) Includes protections for civil liberties and rights, such as judicial oversight and audits; Safeguards and ensures that any restriction of rights is necessary, proportionate, and within a reasonable oversight timeframe Allows for emergency procurement and spending (for example, direct procurement or Public financial accelerated tenders), while maintaining accountability through documentation, ex-post management audits, and limits on the scope and duration of financial derogations Thematic Area 4.3: Adaptive Social Protection adaptive social protection systems, clarifying mandates, roles, and implementation mech- Across countries, a growing number of policy anisms. Others, like Benin and Morocco, have reforms have been introduced to enhance focused on strengthening systems for beneficiary the adaptability and responsiveness of social identification, including through the creation or protection systems to climate and disaster enhancement of registries targeting disaster-af- risks. These reforms include the development fected populations or those in high-risk areas. In and adoption of national frameworks and poli- countries such as the Dominican Republic, new cies that explicitly integrate shock-responsive policies and frameworks have aimed to institu- features, such as in Zambia, which approved a tionalize emergency cash transfers and define national policy that mainstreams resilience and national priorities for adaptive social protection. preparedness against climate shocks, particu- These efforts demonstrate a shift toward building larly for poor and vulnerable households. Several more resilient social protection systems capable countries, including Cabo Verde, Madagascar, of anticipating, absorbing, and responding to and The Gambia, have established legal and shocks. institutional arrangements to operationalize 48 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Guiding questions for a DRM diagnostic Ì How does the social registry capture exposure and vulnerability data relevant to disaster and climate shocks? Ì How are social protection programs designed to adapt or scale in response to shocks? Ì What financing mechanisms exist to scale-up social protection programs in response to shocks? Pillar 5. Financial Protection Financial protection aims to shield govern- expenditures through budget tagging systems, ments, businesses, and households from the as seen in Guatemala and Tuvalu. These reforms economic impacts of disasters. These measures support more informed fiscal decision-making, help maintain fiscal stability during and after a while also establishing a foundation for evalu- disaster and enable quicker and more efficient ating the efficiency and effectiveness of climate responses to emergencies. Financial protection and DRM-related public expenditures. measures include, among others, the quantifi- cation of contingent liabilities associated with Guiding questions for a DRM diagnostic disasters and the adoption of risk financing instruments such as catastrophe funds or para- Ì How has the government assessed its metric insurances to enable rapid mobilization fiscal exposure to disaster risks, including of resources for effective postdisaster response contingent liabilities? without jeopardizing the sustainability of public Ì How is disaster risk reflected in fiscal pol- finances. Together, these efforts highlight growing icy documents such as the medium-term recognition of the importance of proactive finan- fiscal framework or fiscal risk statement? cial planning in DRM. Where such systems remain Ì What structures or units exist within the underdeveloped, they represent opportunities for Ministry of Finance to manage fiscal risks strengthening resilience through targeted policy from disasters? reform. Ì How does the government track DRM and climate-related expenditures, including through budget tagging systems? Thematic Area 5.1: Fiscal Risk Under the fiscal risk thematic area, many Thematic Area 5.2: Disaster Risk Financing (DRF) governments have begun to assess and Strategies and Instruments disclose their exposure to climate and disaster risks. Countries like Mauritania and Tuvalu Progress is evident in the development of have mandated the issuing of fiscal risk state- national DRF strategies and instruments. This ments, while others such as Cabo Verde and the has been the case in countries like Honduras, Dominican Republic have established special- Kenya, and the Philippines, to name a few. ized units within ministries of finance to integrate Governments have also made the necessary disaster risk into fiscal planning. An increasing reforms to establish emergency funds (for number of countries are tracking climate-related Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 49 example, in Cabo Verde and Costa Rica) and reforms help ensure that financial resources are enable the acquisition of risk transfer solutions available for immediate response and recovery, such as sovereign insurance or parametric protecting both vulnerable populations and products, notably in Dominica and Malawi. These public assets. Box 2.5. Leveraging Risk Transfer Mechanisms to Face Extreme Weather Events in Caribbean SIDS Due to their small geographic size, Small Island catastrophic hurricanes, earthquakes, and excess Developing States (SIDS) are uniquely vulnerable rainfall events. to extreme events, as a single hazard can affect a substantial share of national territory simulta- To strengthen household financial resilience neously. The high concentration of exposed assets against these extreme events, Catastrophe means that damage can occur at a systemic scale, Deferred Drawdown Options (Cat DDOs) have with a large portion of public and private assets enabled governments in the region to advance impacted at once. This is particularly evident in risk financing instruments, particularly insur- Caribbean SIDS, where hurricane risk is excep- ance solutions. In Dominica (P177807), the Cat tionally high. For instance, in Dominica, Hurricane DDO supported a policy reform that authorized the Maria caused damages and losses equivalent to domestic sale of a parametric insurance product an estimated 226 percent of GDP (Government of for hurricane risk, expanding access to financial Dominica 2017). Such a high level of risk underscores protection for vulnerable communities against the necessity of comprehensive DRF strategies that climate-related shocks. In Grenada (P171465), the combine risk retention with risk transfer instruments in government introduced a pilot insurance scheme to a cost-efficient manner. At the sovereign level, many help fisheries workers recover from economic losses Caribbean SIDS have engaged with the Caribbean caused by extreme weather events. These instru- Catastrophe Risk Insurance Facility, leveraging ments are fully aligned with the DRF strategies of the parametric insurance to reduce the fiscal impact of respective SIDS and have contributed to deepening insurance penetration in the region. Guiding questions for a DRM diagnostic Ì What sovereign risk financing instruments are available to manage disaster impacts, and how are they structured? Ì Is there a DRF strategy in place, and is it backed by a legal or policy framework? Ì What parametric insurance mechanisms exist to protect public assets or vulnerable populations? Ì How is the country’s emergency fund structured, and how effectively can it channel resources during disasters? Ì Are financial protection tools (e.g., disaster insurance, contingency funds, cash transfers) designed to ensure equitable access for women, informal workers, and vulnerable groups, including those affected by gender-based violence or financial exclusion? Ì Do financial protection tools specifically target women-headed households, marginalized com- munities, and informal sector workers, addressing their unique economic vulnerabilities in the event of a disaster? 50 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Pillar 6. Resilient Reconstruction The reconstruction phase following a disaster as operational continuity plans for key agencies presents a critical opportunity to embed (for example, Peru). These reforms are designed resilience into recovery efforts. Rather than to not only improve the efficiency of disaster simply restoring predisaster conditions, resil- response but also to institutionalize resilience as ient reconstruction emphasizes “building back a core component of long-term development better”—enhancing infrastructure, institutional planning. systems, and community preparedness to with- stand future hazards. This involves integrating Guiding questions for a DRM diagnostic resilience considerations into national recovery frameworks, prioritizing risk-reducing investments, Ì What guidelines or policies are used to and aligning reconstruction efforts with broader conduct post-disaster damage and DRM and development objectives. needs assessments? Ì What frameworks exist for post-disaster Some countries have taken initial steps toward recovery and reconstruction, and how is it institutionalizing postdisaster recovery activated after disasters? processes by developing or updating national Ì How do reconstruction plans incorpo- recovery and reconstruction frameworks. For rate principles of “building back better”, instance, through legal and institutional reforms including resilience and risk reduction? to define responsibilities, streamline procure- Ì Are gender-responsive strategies ment and financing procedures, and establish included in resilient reconstruction plans, dedicated recovery institutions (for example, particularly for housing, livelihoods, and Serbia). In some cases, specialized agencies or public infrastructure (e.g., safe spaces, committees have been tasked with coordinating women’s employment opportunities)? postdisaster assessments, mobilizing resources, Ì Are women, gender-diverse individu- and ensuring that recovery investments als, and marginalized groups actively contribute to long-term resilience. involved in the design, planning, and implementation of post-disaster recon- Governments are also seeking to link disaster struction efforts, ensuring their needs and recovery funding to formal planning instru- leadership are recognized? ments. Legislative and policy measures have Ì Does the reconstruction phase include been introduced to formalize recovery gover- gender-responsive budgeting to ensure nance structures, strengthen financing strategies, that resources are allocated to meet the and define continuity planning requirements for specific needs of women, informal work- critical public services. In certain cases, financial ers, and gender-diverse communities in authorities have adopted fast-track mechanisms housing, livelihood recovery, and eco- for approving postdisaster public invest- nomic empowerment? ments and have initiated the development of sector-specific reconstruction guidelines, as well Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 51 2.2.2. Articulate DRM policy reforms should be excluded. For instance, the example with expected outputs, outcomes, proposed in figure 2.6 does not include reforms and development impacts. related to the legal and institutional DRM frame- work or to the resilient reconstruction pillars. In To put together a technically sound DRM policy fact, due to the cross-sectoral nature of DRM, program, once potential reforms have been achieving meaningful progress across the identified, policy actions should be connected different DRM pillars requires multiple intertwined to changes that strengthen climate and interventions and system-level changes that go disaster resilience. At their core, DRM inter- beyond the scope of a single policy package. The ventions primarily aim to save lives and avoid ToC should serve to acknowledge this and explic- losses when an adverse natural event occurs. itly dismiss some areas of engagement. To achieve this, DRM policies typically seek to increase the ability to cope with adverse natural Demonstrating how policy reforms contribute events through a complementary set of actions to strengthening climate and disaster resil- that enhances the capacity to respond to these ience is a challenging yet crucial task when events while reducing the exposure and vulner- designing effective DRM policy packages. To ability of the population and assets. To be able this end, proposed DRM reforms should first be to make a strong development case for DRM linked with their expected activities and direct policy reforms, identified policy actions must be outputs, as represented in the light blue and articulated with these downstream resilience orange columns of figure 2.6. The effects of the outcomes. A theory of change (ToC) can facili- 22 DRM policy program are then presented on the tate this articulation by acting as an overarching right side of the ToC, distinguishing between the conceptual guidepost that lays out the causal outcomes of the reforms, which can be observed pathways linking policy reforms to the desired even if a disaster does not strike (nonfilled green long-term development impact. column), and its impacts that materialize when a disaster strikes (filled green column). The results Figure 2.6 illustrates how a ToC links tech- of a DRM policy reform program are typically nical elements to help structure a DRM policy measured through changes in the capacity program. This ToC is purely illustrative and to cope with adverse events (that is, those should not be considered prescriptive guidance outcomes that appear in the nonfilled green for operational matters. The dark blue left-hand column).23 Examples of RIs that can help track column of the ToC should reflect the findings progress toward these resilience outcomes are of the DRM policy diagnostic and include the provided below each outcome considered in this preidentified DRM reforms. Areas where the DRM illustrative ToC. framework has been deemed adequate or where the main barrier to resilience is not a policy one Establishing a robust ToC helps refine two (for example, a financing gap or a capacity gap) fundamental aspects of the design of a DRM 22 From a conceptual standpoint, climate and disaster risks are the product of three major drivers: hazard, exposure, and vulnerability. Since individual governments cannot act upon nor regulate hazards, the primary outcomes of DRM policies aim to reduce exposure and vulnerability to these hazards or prepare to respond when these hazards strike. In this note, these outcomes are collectively referred to as resilience outcomes. 23 As noted earlier, robust quantitative evaluation of the impacts of a DRM reform would require the occurrence of a similar adverse natural event before and after the reform to be able to compare losses and attribute the differ- ences in losses to the reform. Risk and economic modeling work can help evaluate these impacts, although they are time and resource intensive and are rarely employed in the design of DRM policy packages. 52 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements Figure 2.6. An Illustrative Theory of Change for DRM Policy Programs DRM Policy DRM Reform Activities Outputs Outcomes Impacts Diagnostic Examples of policy Direct Products Changes in the Adapted from World Bank DRM action addressing consequence of generated by capacity to cope the Sendai Pillars a policy gap the reform the reform with adverse events Framework • Rules and processes • Hazard maps • Hazard and risk for climate and risk Reduced share of including the information information manage- assets and persons projected effects updated and Risk ment have been of climate change shared on the exposed to hazards Identification enacted through the Example of RI: No. are produced. open data approval of a decree of flood protection centralized works initiated in on climate adaptation. platform. watersheds with Transformative effects arising from increased resilience finalized hydraulic studies Reduced • An integrated • The water • Watersheds disaster approach to watershed authority prioritized for mortality and Overarching DRM legal and institutional framework management has been established and water manage- Reduced share of Risk established through the working as a ment improve- vulnerable assets, morbidity Reduction approval of an updated coordinating body. ments. infrastructure and water law. • Water-related risks • Different population • A risk reduction in future climate structural Example of RI: No. program for school scenarios interventions of school facilities facilities has been identified at the assessed through benefitting from approved through a watershed level. probabilistic risk retrofitting works Reduced resolution of the • Vulnerability assessment. direct and ministry of education. studies conducted Increased capacity indirect in school facilities. economic of local govern- ments to respond to losses emergencies • A unified EP&R system • Civil servants • Drills conducted Example of RI: has been created trained in across all the Preparedness % of municipalities through the approval emergency provinces. covered by an of the emergency management • Operational official EP&R local management law. activities. committee Reduced disruption to • The ministry of Increased services • Contingent • The DRF strategy finance’s risk unit has government's liabilities is approved. been tasked with the financial protection associated with • Fiscal risk Example of RI: $ Financial management of fiscal disaster assessed statement value of cat Protection risks arising with and quantified. including DRM climate-related shocks coverage provided considerations through a change to through risk- are published. the ministry of finance’s financing statutory law. instruments Resilient Reconstruction Shock caused by an adverse Under the direct influence of the DRM policy package natural or health-related event System-level: depends on exogenous factors Source: Original for this publication. Note: DRF = disaster risk financing; DRM = disaster risk management; EP&R = emergency preparedness and response; RI = result indicator. policy program: first, the extent to which and persons than increasing households’ ability proposed DRM policy actions will effectively to cope with shocks?). Addressing these issues will lead to resilience outcomes (for example, under require a granular understanding of the country what circumstances will a new water institu- and disaster risk context. The prioritization process tional framework lead to the implementation of described in the next subsection can also provide flood protection works?); second, the relevance valuable insights to anticipate the “resilience of those outcomes for resilience-building efforts return” associated with each potential reform nationwide (for example, is it more important to and identify those reforms more likely to generate reduce the vulnerability and exposure of assets higher resilience impacts down the line. Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 53 Robust analytics and empirical investigations of DRM policies (that is, save lives and reduce should be leveraged to ensure that the artic- losses when a disaster strikes). There is notably ulation between DRM reforms and expected growing evidence that DRM interventions cause resilience outcomes is evidence-based. The changes in a variety of outcomes, even when a different arrows represented in the figure must disaster does not occur. Tanner et al. (2018) have be informed by in-country knowledge and/or framed the benefits of DRM interventions as a global evidence to ensure strong causal links. triple dividend corresponding to avoiding losses The robustness of these analytical underpinnings when disasters strike, stimulating economic will directly shape the quality of the DRM policy activity thanks to reduced disaster risk and lower program. Prior engagements might also help risk perception, and generating wider social and gain a substantial degree of in-country tech- environmental cobenefits. Although these bene- nical knowledge to support effective DRM policy fits are not targeted as the direct outcomes of a design. However, when an important knowledge DRM policy intervention, they should be consid- gap prevails, new analytics are warranted to ered when linking the outcomes of a DRM policy ensure that the main effects of DRM reforms can to its broader development impacts as they are be accurately anticipated. A careful analysis of likely to generate transformative effects and these links will also highlight the main risks that societal shifts. can undermine the implementation of DRM policy reforms and facilitate the identification of mitiga- tion measures. Eventually, these efforts will have a 2.2.3. Prioritize and sequence policy key role in building the evidence base needed to actions: From the Theory of Change inform decision makers and stakeholders. to the DRM policy program Elucidating how DRM reforms are expected to While the first and second stages explored contribute to broader development impacts all possible areas of engagement that can is also essential to show the ambition of strengthen the DRM system, this third phase identified policy actions and strengthen the aims at prioritizing and sequencing policy rationale for DRM policy interventions. Impacts actions. Strategic prioritization is required to proposed in the last column in filled green reflect reach a balance between a comprehensive DRM the global targets of the Sendai Framework reform program—which should address multiple for DRR as an example of the broader devel- DRM pillars—and an efficient program targeting. opment impacts that DRM policy interventions Once all the potential areas of engagement have contribute to produce. These impacts align with been mapped out and articulated with their several Sustainable Development Goals, partic- expected outcomes, it is essential to narrow the ularly those related to climate action (Goal 13), focus of the program on those feasible reforms sustainable cities (Goal 11), and poverty reduction most likely to contribute to building resilience to (Goal 1). In practice, when using this ToC for an climate and disaster risk nationwide.24 actual country, it is important to align anticipated impacts to the priorities set out by the country The final design of a DRM policy program also in its own national development strategy. These faces tradeoffs between ambition and realism. impacts could go beyond the primary objectives An overly ambitious reform can lead to poor 24 The World Bank Policy for DPF formally states that “The Bank determines which of the policy and institutional actions the Member Country has committed to take are critical for the implementation and expected results of the program supported by the development policy operation.” In practice, this important criterion means that the reform to be supported should be critical in order to unlock meaningful progress toward building resilience. 54 Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements outcomes if governments fail to implement Republic, when an earthquake damaged them effectively. This consideration is especially school infrastructure and was pivotal in rais- important in IDA countries or fragility, conflict, and ing awareness about school infrastructure violence contexts, where institutional capacity for resilience issues nationwide. As a result, the DRM-related reforms tends to be more limited. government embarked on a bold reform to In such cases, a sequenced approach might increase the resilience of school infrastruc- be required to target smaller, achievable policy ture, which was included as part of the DRM actions that constitute the building blocks for policy program supported by the World Bank. future larger reforms. For instance, establishing This opportunistic approach could none- an EP&R system or strengthening an EWS is likely theless be weakened if political momentum to yield significant benefits in terms of avoided quickly fades away, and it is crucial to clearly losses during the next flood and might represent understand these dynamics to set expecta- a reform that is more politically and techni- tions appropriately. cally feasible than passing a comprehensive water law—which often triggers intense political ■ DRM reforms should also be prioritized based debates and requires high institutional capacity on the existing institutional capacities and the for implementation—that seeks to harness the availability of technical assistance or other underlying factors exacerbating flood or drought resources that can enhance the impact of risks. reforms. The implementation of DRM reforms typically requires a high level of institutional To sharpen the content of the DRM policy and technical capacities and strong coordi- program, the prioritization and sequencing nation mechanisms. As such, policy reforms of reforms can be guided by the following that can be backed by adequate resources elements: for implementation and capacity-building efforts should be prioritized to ensure that ■ Selected DRM reforms should be integrated legislative changes are translated into tan- into the country’s broader development gible resilience-building improvements. The agenda and prioritized based on political availability of resources for technical assis- momentum. Broad-based support for DRM- tance should therefore be considered when related reforms is usually challenging as prioritizing areas of engagement. Sectors their benefits seem distant—especially when where the World Bank or other donors are large, up-front investments are needed to actively supporting governments through protect against low probability—and long investment lending or other operations might exceed average political mandates and also be prioritized as they are more likely to attention spans. However, the occurrence of foster the technical expertise necessary to a catastrophe can open windows of oppor- support policy implementation. tunities to generate buy-in for selected DRM reforms and facilitate the emergence of ■ Ultimately, this prioritization process should DRM reform–oriented leaders. This politi- pursue an integrated approach that seeks to cal momentum can guide the prioritization make different DRM reform trajectories mutu- process as it typically increases the likelihood ally reinforcing. To this end, the final design of of passing an ambitious reform that might the DRM policy program should prioritize syn- otherwise struggle to advance. This was, for ergistic areas of engagement to more effec- example, the case during the preparation tively mainstream DRM considerations across of the first DPF Cat DDO in the Dominican sectors. For example, if reforms to reduce the Chapter 2  Strengthening DRM Policy Frameworks: Lessons Learned from DPF Cat DDO Engagements 55 structural vulnerability of critical infrastruc- are guided by sound information. Ensuring ture are supported, the final DRM package the consistency of the DRM package will also could also include reforms aimed at fostering support effective implementation and help Photo: Destruction after a 5.6 magnitude earthquake in Indonesia. © Adennysyahputra. risk information production and/or sharing translate policy changes into increased resil- to ensure that risk reduction interventions ience on the ground. 56 References Agamben, Giorgio. 2005. State of Exception. IMF (International Monetary Fund). 2016. “Small Chicago: University of Chicago Press. States’ Resilience to Natural Disasters and Climate Change—Role for the IMF.” IMF Policy Paper. Ghesquiere, Francis, Prashant, Robert Reid, Jan Washington, DC: IMF. Kellett, Shyam KC, and Jack Campbell. 2012. The Sendai Report: Managing Disaster Risks for a Tanner, Thomas, Swenja Surminski, Emily Wilkinson, Resilient Future. World Bank, Washington, DC. Robert Reid, Jen Rentschler, and Sumati Rajput. 2018. The Triple Dividend of Resilience: Realizing Government of Dominica. 2017. Post-Disaster Development Goals through the Multiple Benefits Needs Assessment: Hurricane Maria, September of Disaster Risk Management. World Bank, 18, 2017. Government of Dominica, Roseau. Washington, DC. IEG (Independent Evaluation Group). 2015. The UNDRR (United Nations Office for Disaster Risk Quality of Results Frameworks in Development Reduction). 2024. Implementation of the Sendai Policy Operations. World Bank, Washington, DC. Framework for Disaster Risk Reduction 2015–2030: Report of the Secretary-General. Seventy-ninth IEG (Independent Evaluation Group). 2016. Lessons session of the UN General Assembly, New York. from Environmental Policy Lending. World Bank, Washington, DC. World Bank. 2022. Development Policy Retrospective 2021: Facing Crisis, Fostering IEG (Independent Evaluation Group). Recovery. World Bank, Washington, DC. 2022. Reducing Disaster Risks from Natural Hazards: An Evaluation of the World Bank’s World Bank. 2024. “Proposed Changes to IBRD/IDA Support, Fiscal Years 2010–20. World Bank, Operational Policies to Enhance the World Bank Washington, DC. Crisis Preparedness and Response Toolkit.” Chair summary, World Bank, Washington, DC. 57 Appendix A. Additional DPF Cat DDO Portfolio Trends As part of the portfolio review conducted for this some variation in the distribution of PAs can be report, the distribution of PAs across the DRM observed between these groups, we refrain from Pillars was further disaggregated by Standalone drawing firm conclusions, as a larger number of and Mixed DPF Cat DDOs (figure A.1); SIDS and operations would be needed to enhance compa- non-SIDS countries (figure A.2); and first versus rability and strengthen the statistical robustness second Cat DDOs (figure A.3), to assess whether of this analysis. differentiated distribution patterns emerge. While Figure A.1. Distribution of PAs by DRM Pillar, for Standalone and Mixed DPF Cat DDOs DRM Framework Risk Reduction Financial Protection Risk Identification Preparedness Resilient Reconstruction 0% 2% 16% 21% 21% 20% 1% 6% 19% 17% 43% 34% Mixed DPF Cat DDO DPF Cat DDO Source: Based on World Bank data as of December 31, 2024. Note: DPF Cat DDO = Development Policy Financing with a Catastrophe Deferred Drawdown Option; DRM = disaster risk management. 58 Appendix A  Additional DPF Cat DDO Portfolio Trends Figure A.2. Distribution of PAs by Pillar, for SIDS and Non-SIDS DRM Framework Risk Reduction Financial Protection Risk Identification Preparedness Resilient Reconstruction 1% 2% 18% 19% 20% 22% 4% 5% 18% 17% 41% 34% SIDS Not SIDS Source: Based on World Bank data as of December 31, 2024. Note: DRM = disaster risk management; SIDS = Small Island Developing States. Figure A.3. Distribution of DRM Pillars in First and Second DPF Cat DDOs DRM Framework Risk Reduction Financial Protection Risk Identification Preparedness Resilient Reconstruction 1% 3% 16% 19% 24% 21% 4% 5% 17% 18% 38% 35% 1st CAT DDO 2nd CAT DDO Source: Based on World Bank data as of December 31, 2024. Note: Cat DDO = Catastrophe Deferred Drawdown Option; DRM = disaster risk management. Appendix A  Additional DPF Cat DDO Portfolio Trends 59 Figure A.4. Distribution of DPF Cat DDO Duration (in Years) by Source IDA IBRD 18 16 14 Number of CAT DDOs 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 Duration (years) Source: Based on World Bank data as of December 31, 2024. Note: Cat DDO = Catastrophe Deferred Drawdown Option; DRM = disaster risk management; IBRD = International Bank for Reconstruction and Development; IDA = International Development Association. 60