Morocco: World Bank grants loan to boost disaster risk management
Source: Middle East Insurance Review | Jan 2020
The World Bank has recently approved a $275m Disaster Risk Management Development Policy Loan for Morocco that contains a Deferred Drawdown Option for Catastrophe Risks (CAT DDO) designed to both help the country strengthen its capacity to manage the financial impact of natural disasters and climate-related shocks, and to upgrade its institutional framework for disaster risk management.
“The CAT DDO aims to help Morocco develop a comprehensive framework for disaster risk management, building on a previous World Bank-supported programme – the Integrated Disaster Risk Management and Resilience Programme for Results. Developing comprehensive risk insurance is particularly critical for the vulnerable population whose livelihood can be threatened in the event of a natural disaster,” said Mr Jesko Hentschel, World Bank Maghreb country director in a statement.
Private insurance
The CAT DDO will support reforms designed to strengthen the financial, governance, and operational framework of the Solidarity Fund against Catastrophic Events (FSEC). This fund is a critical tool which complements private insurance by providing compensation to the uninsured, such as the poor and most vulnerable. It makes use of sophisticated risk financing instruments to cover losses caused by extreme flooding and earthquakes.
Critical reforms brought by this new programme include a parafiscal charge on insurance designed to create a sustained source of financing for the FSEC, as well as measures to bolster the private insurance market in case of a catastrophic event. The programme also aims to develop a registry of beneficiaries to allow timely, targeted compensation to populations affected by a disaster.
The CAT DDO approach contains widely proven financial and policy tools used to provide a contingent line of credit. After a natural disaster, it will give the government immediate access to liquidity, adding a critical layer to Morocco’s risk management strategy. In addition, the programme seeks to upgrade the country’s institutional framework for disaster risk management as well, by strengthening the National Civil Protection system and creating a National Flood Risk Management Information System.
Under the CAT DDO loan conditions, the line of credit will be available for disbursement at any time within a period of three years, which can be extended up to four times for a total period of 15 years. M