ISLAMABAD: The Asian Development Bank has emphasised that there is an urgent need to enhance the current disaster risk finance approach in Pakistan. In a report published on Monday, the ADB warned that risk retention mechanisms are insufficient to cover the losses associated with even the most frequent flood and earthquake events, while private insurance solutions for these risks have achieved only minimal market penetration.

The report, “Narrowing the Disaster Risk Protection Gap in Central Asia,” says these challenges are compounded by a challenging external financing context at the sovereign level, making it difficult to access debt quickly and cheaply after a disaster, and low levels of financial inclusion that exacerbate the vulnerability to disaster events of many in Pakistan.

Previous disaster events illustrate the challenges that Pakistan faces, says the report, citing examples of floods in 2010 and 2015 that caused an estimated Rs32.6 billion in losses to farmers in Punjab. To support the affected farmers, the government provided Rs6.7bn — amounting to only 18.5 per cent of the required amount.

The ADB report says there would appear to be a need to increase the coverage and depth of the existing risk retention instruments for high-frequency events through enhanced functioning of the national and provincial disaster management funds.