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EUROPEAN COMMISSION
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Kristalina GEORGIEVA
EU Commissioner for international cooperation, humanitarian aid and crisis
response
The role of the private sector in developing the EU's
policies on Disaster Risk Management
Speech on Public Private partnerships and DRM
Rotterdam, 10 February 2014
Introduction: the Dutch experience and the increasing trend of disasters
Minister Opstelten
State Secretary von Esch
Ladies and Gentlemen,
It is a great pleasure to have been invited to give a presentation in the Netherlands
because, more than any other European country, Holland is a nation whose history and
even its national identity have been shaped by disasters.
Flooding and flood prevention are existential issues for the Dutch. The great flood of
1953 is still fresh in the collective memory. And it was this flood that changed thinking
on disaster management. People realised that, even though extreme events are rare,
they will reoccur. Investments need to be made in disaster risk management and in the
case of the Netherlands this resulted in the world-leading Delta Works (Dutch:
Deltawerken) system of flood defences.
Effective management of risks is nothing new. But we are living in an increasingly fragile
world where global trends such as climate change, urbanisation, population growth and
environmental degradation mean that the frequency and intensity of disasters has risen
steadily over recent decades. Getting risk management right has never been more
urgent.
Developing countries are hardest hit in terms of lives lost. Recently, over 25 million
people were affected by droughts in the Horn of Africa and the Sahel. Typhoon Haiyan in
the Philippines impacted over 16 million individuals. Developed countries are also
vulnerable as Hurricane Sandy and the Japanese earthquake/tsunami reminded us. In
Europe natural disasters resulted in 100,000 deaths over the last decade.
And as the world continues to warm up and populations continue to grow these trends
are set to continue. It is estimated that the urban population exposed to earthquakes
and major storms will more than double by 2050 and reach 1.5 billion people.
I would like to structure my reflection around three issues.
Firstly, what is the economic rationale for disaster management; secondly, I will reflect
on how the private sector can best contribute to a successful disaster management
policy; thirdly, I will look at what the European Commission can do to take this agenda
forward.
SPEECH/14/130
The economic case for investing in DRM
Disasters result in human loss and suffering but can also cause massive economic
damage. This may be obvious for the Netherlands - where some 70% of economic
output is generated in areas that are below sea-level – but the fact is that these losses
are already massive and they are increasing. A recent World Bank report concluded that
the cost of disasters has quadrupled over the last 30 years – from an annual average of
around a year in the 1980's to annual losses of some US$ 200 billion today.
We are also witnessing a worrying trend in Europe where average annual losses have
risen from €9 billion in the 1980s to more than €13 billion in the 2000s. One single
event, the 2013 flooding in central Europe is estimated to have cost €13.5 billion. These
floods were the most expensive natural disaster in Germany's history.
The physical impact of a disaster is localised but we have seen that the economic shock
waves can ripple out to economies and businesses on the other side of the world due to
damage to energy distribution, loss of markets and disruptions of supply chains.
In 2011 the flooding in Thailand resulted in a 9% drop in the Thai GDP. It also disrupted
the global production of a host of high-tech manufacturers. Producers such as Western
Digital were particularly hard hit and this matters because Western Digital produces 1/3
of the world’s Hard Disk Drives and sells to major computer manufacturers like Acer,
Dell, and Hewlett-Packard. The flooding in Thailand resulted in an industry-wide
shortage of hard disks.
In the same year, the Japanese earthquake, tsunami and nuclear incident hit economies
across Asia and disrupted the manufacture and export of products ranging from satnavs
to brakes, paint and computer chips. The economic fallout even hit the UK where
workers at Honda's Swindon factory were put on a two-day-week due to a shortage of
parts.
These are hard facts and they explain why governments are beginning to conclude that
sustainable economic development needs to understand and address the risks
from natural and man-made disasters. This is not just a conclusion reached by the
ministers responsible for civil protection. The need to build resilience to disasters is
increasingly recognised as a priority by minsters of finance. This is hardly surprising
since a recent paper from the IMF noted that natural disasters often lead to lower
economic growth and a worsening in fiscal and external balances. They can also have a
significant impact on poverty and social welfare.
This is why we need to build resilience and foster a culture of disaster risk reduction.
These investments make strong economic sense and we know well that the rate of
return on every euro is between 4 and 7 times. But the truth is that investments in
disaster management are still too low and do not match the increasing risks that we are
facing.
Contribution of the private sector to successful disaster management
(1) Public authorities already rely on the private sector expertise to respond to
emergencies. All the specialised equipment used by first responders – from flame
resistant clothing to high-tech CBRN detection labs – are produced by the private
sector. These are niche markets, but as investments in disaster management increase so
will the importance of these markets.
Public authorities also need to be actively involved with the manufacturers of these
products to ensure that appropriate standards are met and that inter-operability is
ensured.
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The European Commission does not have any civil protection assets of its own. We help
coordinate the work of national response teams. But we do use a framework contract
with a private company to organise the transport and logistics related to the delivery of
assistance. This is how our support for Japan was organised during the 2011 emergency.
And at the end of last year this framework contract was used to transport assistance
from NGOs to the Central African Republic.
The private sector can also provide invaluable and innovate support when humanitarian
assistance is needed. The World Food Programme has providing beneficiaries with prepaid credit cards can be a more efficient way of managing the distribution of aid while at
the same time maximising the dignity of the beneficiaries.
(2) Beyond response capacities, the private sector can provide valuable tools
for disaster risk management. This is particularly the case for the insurance and reinsurance industries which are, when you think about it, all about managing risks.
Last year the Commission launched a Green Paper to start a reflection on how these
industries could better help us manage the risks associated with natural disasters. The
response was overwhelming with over 70 individual submissions. Insurance experts
certainly realise that we live in a world where risks are increasing and they see that this
is a challenge for the industry (faced with increasing pay outs) as well as an opportunity
(more risk can lead to more business).
We will shortly be publishing a summary of the responses to the Green Paper. But a
number of important themes have already emerged.
First, a well-functioning disaster risk insurance system can allow quick pay-outs
whenever disaster strikes so that damages can be repaired and livelihoods restored.
Without insurance the state can often become the last resort for emergency payments –
a situation which undermines public finances (which are already fully strained at a time
of austerity). Unfortunately there is a long way to go in Europe since the take up rates
for disaster insurance are low: only 30% of disaster losses are actually insured against.
Second, well-designed insurance policies can also work as a market based instrument to
discourage risky behaviour and mainstream disaster proofing in economic and financial
decisions. Insurance can contribute to a shift towards a culture of risk awareness
through:
 Risk-based pricing which can motivate insured individuals and businesses to
reduce their exposure to risk (and thereby reduce their premium).
 Better research and data will allow a better and more transparent mapping of
different risks. A bit like the Blue Flags that we have for our beaches if people are
made aware of the real risks that they face they are likely to change their
behaviour accordingly. And better data on risk will allow insurance companies to
develop risk based pricing.
Third, insurance can contribute to development policy by helping countries that are
particularly vulnerable to disasters to effectively "hedge" against the risk of disasters.
(3) Public authorities can also work with the private sector to develop key
technologies, and improve research on disasters as well as disaster risk management
strategies and actions.
There is an increasing need for innovative technologies and instruments to support
disaster management. These range from early warning systems to technological
developments such as risk-modelling and the development of new materials for resilient
construction.
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Investing in disaster risk reduction saves lives and minimises economic losses. But these
investments can also bring economic opportunities. Let me return to the example of the
Dutch who are, through necessity, world leaders in water management. As the climate
changes, cities across the world are waking up to the threat that they are facing and are
turning to the Dutch for advice. Dutch water-management experts are currently
providing expertise all over the world, from New Orleans, to St. Petersburg and Jakarta.
Investing in disaster management is also a driver of innovation. The radar images from
the European Earth observation satellites mean that the Dutch Directorate-General for
Public Works and Water Management (Rijkswaterstaat) can check the integrity of the
dykes remotely and with millimetre accuracy. Dutch companies have developed new
technologies such as "intelligent" geotextiles that can provide early warning of
deformations in soil structures. These are cutting edge technologies and services that
the world will increasingly need. And as a happy side effect they give a major boost to
Dutch economic competitiveness.
What applies to Holland and water management applies to Europe more generally.
Increasing Europe's resilience to crises and disasters will require the development of
dedicated technologies and capabilities to support different types of emergency
management operations such as firefighting, environmental contamination, marine
pollution, development of medical information infrastructures rescue tasks, and disaster
recovery processes.
Developing these capacities, making the associated investments and exporting the
resulting know-how can act as a means of promoting jobs and growth and open potential
'lead markets' where European firms should look to invest.
Areas for future cooperation with the private sector
Over the past decade, EU cooperation in civil protection and humanitarian aid has
evolved by shifting from response towards a more balanced system that also covers
preparedness and prevention actions. And as we roll out these policies it is clear that a
close collaboration with the private sector will be essential. I am quite sure that this will
be a major theme covered by the successor to the Hyogo Framework for Action that we
will shortly be negotiating.
A lot of this implementation work will be for the next Commission but I would like to
conclude by suggesting five areas where this public-private cooperation could be usefully
developed:
First, we need to increase the levels of investment in disaster risk management. The
new generation of EU structural funds explicitly open up the possibility of European
funding for the development and implementation of risk management plans. It is now up
to national authorities to take up this opportunity and incorporate the issues in their
national programmes.
Second, we need to have a more structured dialogue between policy makers the
industries that have an interest in DRM. Specific "roundtables" exist for other industrial
sectors and I can see no reason why something similar should not be set up for the DRM
sector.
Such a dialogue could usefully look at the disaster-related CSR activities that many
companies are already carrying out (e.g. the big logistics companies) and see if they
could be linked into the response plans that we are planning at the national and
European levels.
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Third, the insurance Green Paper needs to be followed by a specific initiative aimed at
the insurance sector. Without pre-empting future political discussions on this question it
is clear that issues that could be addressed include: (i) improving the low take-up rate of
disaster insurance (ii) moving towards systems with a higher degree of risk based
pricing (iii) improving the accuracy and comparability of risk data and risk modelling,
and (iv) learning the lessons from all the insurance pilot projects that have taken place
in developing countries and finally scaling up the most promising approaches at the
national level.
Fourth, we could consider resilience certification for industries that have prepared
themselves for disasters. The idea would be similar to eco-labelling and incentives could
be introduced by linking certification to reduced insurance premiums.
Finally, there is more that we can do to focus the EU's research tools on improving our
knowledge of disasters and developing innovative disaster management technologies.
Let me be clear – we are already doing a lot here. One example is Project MATRIX 1
which aims at developing a common framework for risk assessment and analysis.
Another is the global earthquake model "GEM" which has been developed to bridge the
gap between the increasing vulnerability to earthquakes worldwide and the lack of
reliable risk assessment tools and data.
But there is more that can be done and, through its new research Framework
Programme Horizon 2020, the EU should look to consolidate existing research and
develop DRM as a "lead market" for the EU.
Honourable Ministers,
Ladies and Gentlemen,
I have set out the argument that in an increasingly disaster prone world investments in
disaster management are necessary for our physical and economic security. These
investments pay for themselves many times over and since disaster management is –
unfortunately – a booming sector if the EU takes a lead here it could contribute to our
economic prosperity.
My mandate as European Commissioner responsible for these issues will shortly be
coming to an end. But I am satisfied that the last five years have seen a shift in thinking
where we now realise that if we want to make our economies and societies more
competitive and sustainable then we need to invest in resilience and risk management.
Governments, the private sector and individuals all need that factor risk into our daily
lives and long-term decisions.
The better we understand the economics of disaster management the clearer it is that
the private sector has central role to play in delivering resilience. I am therefore
convinced that developing the relationship with the private sector will be one of the
major themes of themes of future thinking on disaster risk management – at the
European level and indeed at the global level.
The subject of the conference could not be more topical or more important. I therefore
wish you every success with the discussions that follow.
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New Multi-Hazard and Multi-Risk Assessment Methods for Europe
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