Resilience Pays:
Investing and Financing for Our Future

1. Democratize risk understanding

Quality risk information aligned to local realities is fundamental to directing investment effectively to prevent, reduce and manage risk. Risk information needs to be standardized, accessible, comparable, and, as much as possible, open source. But most of all it needs to be global. All countries and markets suffer when risk knowledge is sold only to the highest bidder.

While hazard information is improving globally, governments need to do a better job of connecting this to exposure and vulnerability data to better pinpoint risk. As outlined in Chapter 4, doing so can make pro-poor investments more effective, accelerate disaster recovery and protect infrastructure.

Equally important, both the public and private sectors need access to robust risk information and clear analysis of their likely average annual losses, and, in the case of a larger events, their probable maximum losses. This data must be useable by governments, financial markets, central banks and disaster managers. Metrics need to be tailored to local realities and meet the needs of a wide range of stakeholders, such as central and local governments and project planners. This can enable financial decision makers to begin prioritizing risk reduction actions by geographic area and by key hazards over the medium to long term. Risk metrics should be complemented by resilience indicators, making the benefits of investing in resilience clearer and easier to integrate into decisions. Harnessing both local knowledge and technological advances in machine learning and the appropriate use of artificial intelligence can accelerate trend analysis and the application of new insights into risk.

2. Use public financing and regulation to break the risk-creation addiction

Physical disaster risks now need to be monitored and managed like any other potential risk to the financial system. What is often seen as unpredictable volatility, or even uncertainty, can in fact be distilled into probabilities and expected losses that can be managed and budgeted for. Governments have a role in setting guardrails, in spreading learning, and in improving access to quality risk data. Metrics and taxonomies exist that can be enhanced to increase their coverage and quality through public-private collaborations and standard setting- as UNDRR has already been doing with key partners.

Governments can lead by ensuring disaster risk financing strategies are fit for the future and a core part of their operations. These strategies need to inter-lock three elements: risk reduction, risk transfer and improved risk management and be based on quality risk information tailored to a countries’ specific exposure, vulnerability and hazard profile.

When implemented effectively, the evidence clearly shows that resilience pays- it saves lives and reduces the scale of humanitarian catastrophes. Even small, relatively low-cost actions, such as accelerating post-disaster recovery support to households, can yield lasting benefits by stabilizing domestic incomes and helping small businesses stay afloat. These actions also buffer against GDP losses from disasters that can balloon levels of debt, decrease credit ratings and derail development. When disaster risk reduction works, emergencies are prevented, and development investment goes further.

Reaping the rewards of resilience also requires ring-fencing disaster risk reduction budgets to empower responsible agencies and mainstreaming disaster risk reduction across sectors and plans. It means putting in place appropriate accountability mechanisms, including budget tagging and tracking systems for DRR-related expenditures. And it means keeping track of how ministries have articulated and allocated funds across the layers of risk management and systematically capturing lessons on what worked and what needs improvement after disasters.

Measuring disaster resilience across sectors is essential to ensure that standards are applied consistently to public investments—both now and in the future. This, in turn, is important for entities such as public pension funds so that younger generations remain confident that the contributions they make today will retain their value in the future.

3. Innovate to keep risk transfer and insurance sustainable

Risk transfer mechanisms such as insurance can no longer thrive unless governments and companies ensure their actions are more resilient to disaster shocks. To quote Prime Minister Mia Mottely of Barbados, “if it is not insurable it is not investable.” Risk transfer has great potential to incentivize risk reduction: if a country invests in risk reduction, insurance premiums should come down. When insurance companies are required to publish coverage and non-renewal data annually, it sends a powerful signal to markets about the price of unsafe infrastructure, supply chains and areas where risk is increasing. And as volatility in hazard patterns increases, scaling up the pool of people and assets protected by public and/or private sector-backed risk transfer mechanisms is essential to take resilience-building to scale.

Making this work will require insurers to evolve. Cover should no longer be priced based on replacement cost alone. It needs to enable rebuilding to a standard that is fit for the future, and products need to be better adapted to their specific contexts. Insurance products have often struggled when transplanted wholesale from developed to developing countries without adaptation. In many cases, this has created affordability challenges or eroded trust between policyholders and insurers. A more tailored approach—one that supports insurance in easing the relief burden on governments while protecting consumers—is essential if risk transfer tools are to succeed across both developed and developing contexts, as illustrated by the case studies presented in chapters 4 and 6.

Beyond domestic and commercial insurance, finance for adaptation and loss and damage are among the types of risk-sharing instruments that offer considerable potential for expansion. Needs-based social safety nets have long functioned in areas such as public health to cover individuals against rare but predictable diseases. The same kind of social safety nets must now emerge at scale to protect low-income workers from infrequent but high-impact disasters (such as periods of extreme heat, when outdoor work is impossible) and to ensure that recovery assistance reaches poor households quickly.

4. Make the business case

The private sector accounts for about 75% of capital investment in most economies, but if these investments are not risk-informed, societal resilience will remain out of reach. There is significant scope for innovation and co-financing partnerships to incentivize private sector innovation and investment in disaster risk reduction. Much of the world’s hidden disaster risk is concentrated in companies that are under-insured and increasingly exposed to direct damage, supply chain disruption, and broader financial volatility.

Increasingly investments underpinned by sound plans to manage risk and future volatility will continue attract financing to meet sustainable development targets. Others may struggle. A lack of risk understanding cannot be allowed to hamper investment and development, particularly in the countries that need it most.

Communities and companies alike have centuries of experience in coping with disasters and taking action to reduce risk. Today, at the dawn of a new information age, their capacities can be vastly strengthened by applying artificial intelligence to accelerate learning and analyze trends across many areas of disaster management. At the same time, advances in engineering and emerging resilient technologies offer new opportunities to build more safely and affordably. Industries such as insurance recognize that their expertise in risk analytics has value beyond underwriting— helping to identify and scale up safer, and therefore more investable, infrastructure. These efforts deserve recognition, and ideally incentives, alongside other strategic tools needed to ensure a just and green transition.

5. Anticipate shocks to reduce humanitarian needs

Because resilience-building to date has been insufficient, many vulnerable countries often remain trapped in a vicious cycle of disaster, response and recovery, only to repeat the pattern again and again. The international community has a shared responsibility and interest in breaking the cycle. This requires scaling up anticipatory action and finance, while also increasing the percentage of aid activities targeting disaster risk reduction beyond the current global level of 2%.

It also requires a shift in mindset—recognizing that disasters arise not just from hazards, but from underlying vulnerabilities or heightened exposure that enable hazards to escalate into a humanitarian crisis. Employing low-cost tools, such as disaster forensic analysis, to pinpoint these factors is essential. This is because recovery efforts targeted at reducing core vulnerabilities or the most damaging exposures, are more cost effective and have the greatest potential to prevent future crises.

Reducing humanitarian needs reduces suffering and loss of life. It is cost effective, and it benefits individuals, societies, economies and the environment, even decades after a shock has passed. But reducing needs in the middle of a disaster is impossible: it requires careful proactive risk reduction to prevent hazards from escalating into disasters.

6. Leverage the multiplier effect of international financial mechanisms

International finance institutions and public planners must harness the power of increasingly globalized financial markets to share risk more broadly, find better ways to prevent fiscal gaps, and support faster, better-targeted recovery—ensuring that disasters do not create humanitarian needs and long-term suffering.

Increasing resilience can deliver significant efficiency gains—and these must be central to how multilateral donors and development banks protect their portfolios from the cascading impacts of disaster volatility. Even relatively modest interventions, such as extending reinsurance-style coverage to absorb a share of GDP losses when LDCs and SIDS are impacted by a major disaster can prevent debt defaults and avert decades of stalled development. Resilience pays, and concrete measures to buffer against disaster shocks should become standard in the design of sovereign loan programs and in the prioritization of official development assistance (ODA).

As multi-lateral systems evolve to address complex challenges such as adaptation and loss-and-damage finance, it will be essential to draw lessons from risk pooling and reinsurance. This requires innovation and sustained learning, but the potential benefits are substantial. There are mechanisms in place that can be strengthened to facilitate this, such as the Santiago Network, which aims to provide much-needed technical assistance to developing countries for building resilience to loss and damage.

In many contexts, tools like ODA, and, increasingly, climate adaptation finance, should be used to help fiscally constrained countries enhance their resilience. This not only supports long-term stability, but also increases the effectiveness of aid, given that disaster risk reduction measures often deliver some of the highest benefit-cost ratios, ranging from 2:1 to 10:1 or more.