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OECD urges use of micro-catastrophe bonds for Asia disaster financing

The OECD says most natural disaster losses in emerging Asia remain uninsured, leaving households, small businesses, and local governments exposed to financial shocks.

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The Organisation for Economic Co-operation and Development (OECD) has highlighted growing potential for smaller catastrophe bond structures, saying improved market infrastructure is making these “micro-catastrophe bonds” more feasible for disaster risk financing.

In a policy brief authored by Kensuke Molnar-Tanaka and Prasiwi Ibrahim of the OECD Development Centre, the organization argues that insurance and catastrophe bonds should be considered as part of a broader micro-disaster risk financing toolkit for emerging parts of Asia.

The OECD warns that the majority of natural disaster losses in emerging Asia are still not insured, which can expose households, small businesses, and local governments to income and asset losses, business disruption, and strain on local authorities when disasters occur.

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