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The cost of disaster relief and reconstruction has been steadily growing. A new form of public-private partnership can make societies more resilient by absorbing the financial impact of the catastrophes.

Partnerships such as these allow governmental and other organizations to manage disaster expenses in a more efficient manner by funding themselves before hand. Insurers have developed innovative financial risk profiles that would mitigate the impact of disasters. The insurers provide a model for public sectors to push their available credits and allowing governments to protect their budget and move the adequate funds for relief activities.

Therefore, risk avoidance is one of the key issues along with mitigation strategies and therefore must be the first priority in managing disaster. To reduce any kind of risk, funding is important, but no country can fully insulate itself from extreme events. Managing catastrophic events has to be a key element in financial strategy of every disaster prone region to enable a sustain growth in order to reduce financial volatility and potential ruin from events that exceed their resources.

Sources: Risk Financing, Swiss Re

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