Climatic Change

, Volume 133, Issue 1, pp 85–100 | Cite as

Financial instruments for disaster risk management and climate change adaptation

  • Joanne Linnerooth-Bayer
  • Stefan Hochrainer-StiglerEmail author


The International Panel on Climate Change (IPCC) has called for a new balance between reducing the risks from climate extremes and transferring them (for example, through insurance) as means for effectively preparing for and managing disaster impacts in a changing climate. This paper elaborates on this balance with an overview of disaster risk financing mechanisms and how they contribute to disaster risk reduction and climate change adaptation in developing countries. We suggest a risk management approach that targets risk reduction and risk financing to different layers of risk, including a layer that represents a possible limit to adaptation. By reviewing traditional post-disaster financial arrangements, such as government compensation, and non-traditional pre-disaster instruments, such as index-based insurance, we show how risk financing can complement and stimulate risk reduction. We discuss the benefits of financial instruments, including the provision of post-disaster finances for recovery and pre-disaster security necessary for climate adaptation and poverty reduction. These benefits come at a cost, and we discuss the risks, challenges, and future prospects of risk financing in developing countries.


Disaster Risk Climate Change Adaptation Disaster Risk Reduction Insurance Contract Disaster Loss 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  • Joanne Linnerooth-Bayer
    • 1
  • Stefan Hochrainer-Stigler
    • 1
    Email author
  1. 1.IIASA—International Institute for Applied Systems AnalysisLaxenburgAustria

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