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The growing impact of major disasters on OECD and non-member economies has stimulated a demand for an in-depth evaluation of possible strategies to reduce their large-scale damaging effects. Dramatic events such as the devastation caused by Hurricane Katrina in the United States in 2005, and the earthquake that struck China’s Sichuan Province in 2008, have brought the financial management of catastrophic risks once again to the forefront of the public policy agenda globally.
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This section of the publication provides a comparative review and stocktaking of different policy strategies and institutional approaches to the financial management of large-scale disasters in selected OECD and nonmember Asian countries drawing, inter alia, from the results of data collection activities pursued by the OECD in the recent years under the aegis of the Network project.
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The comparative review and stocktaking conducted in this section of the publication show that there is a wide variety of policy strategies and approaches to the financial management of large-scale disasters, with different degrees of private and public sectors participation and responsibilities, and different types of explicit or implicit coordination mechanisms.
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Over the past few years, the losses from natural disasters have increased significantly both in OECD and non-OECD countries. In countries that benefit from warning systems and effective mitigation programs, consequences are often much lower than in emerging economies that are deprived of such capacity. In south-east Asia, the tsunami in December 2004 killed more than 280 000 people residing in coastal areas within just a few hours. A month after Cyclone Nargis made landfall in Burma in May 2008, as the deadliest natural disaster in the recorded history of the country, it was estimated that this severe cyclone had killed over 200 000 people. The same month the Great Sichuan Earthquake in China is estimated to have killed nearly 70 000 people and 5 million others homeless though this number could be as high as 11 million.
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The past 15 years have witnessed a series of large-scale catastrophes that have inflicted historic economic and insured losses throughout the world. Half of the 20 most costly insured catastrophes since 1970 occurred after 2001. Except for the terrorist attacks of September 11, 2001, all of them were natural disasters. In Chapter 1 we discussed why the growing concentration of population and structures in high-risk areas, combined with the potential consequences of global warming, are likely to lead to even more devastating catastrophes in the coming months and years, unless proper risk reduction measures are implemented now.
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Whenever the issue of new risks and emerging crises arises, the spectre of September 11 casts its shadow. But 9/11 is not the only issue. For instance, Katrina has altered the agenda of influential circles in Washington, which are now calling for an "all-hazards approach” less focused on the single problem of terrorism. More generally, we find ourselves today in a transitional period, marked by global discontinuities with respect to security and vulnerability on all fronts - environment, climate, demographics, public health, technology, social dynamics, economic tensions, geostrategy, violence. Whatever the field, we now see the curtain fall on an era whose mantra was “everything is under control" - the misleading guiding principle that dominated the approach to risk and crisis throughout the years 1980 to 2001. In other words, we have witnessed "the end of zero risk" (Lagadec-Guilhou, 2002), and we now need a new vision and new practices.
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This is the major risk we face today: to keep trotting out the line that "everything is under control", “don't be pessimistic and so don't ask any questions", while demanding that the citizens give up the idea of "zero risk", while complaining constantly about the "unhealthy litigiousness" of our societies
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Major financial institutions play a critical role in the recovery process in the wake of a crisis. That role is even more important in what is becoming a chaotic environment: astronomical direct costs, cascading damages that are impossible to assess, beneficiaries that are impossible to reach, public institutions and essential operators that are profoundly destabilized.
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During the night of November 1, 1986, a fire broke out in one of the Sandoz warehouses in Schweitzerhalle, not far from Basel, Switzerland. The warehouse contained 1351 tonnes of chemicals, intended mainly for agricultural use. Firefighters brought the blaze under control in the early hours of the morning. The warning issued to local people, to stay indoors and close the windows, was lifted around 7 a.m.. The incident was over and the "emergency" had been dealt with.
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Hurricane Katrina struck the Gulf of Mexico coastline on August 29, 2005. It is estimated to have caused 1,300 deaths: it was the costliest hurricane in terms of human lives since 1928 (when the Okeechobee hurricane killed 2,500 people), and the third worst in American history (Galveston, 1900, 8 000 deaths)2. An essential point is that it presented two facets:
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