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Risk Awareness, Capital Markets and Catastrophic Risks

image of Risk Awareness, Capital Markets and Catastrophic Risks

The OECD contributes to the improvement of the financial management of major catastrophes both through the activities of the International Network on the Financial Management of Large-Scale Catastrophes and through the leadership of its High-Level Advisory Board. This publication compiles a series of reports reflecting the OECD’s extensive work in this field over recent years. These reports include: 1) a stocktaking of initiatives to promote natural hazard awareness and disaster risk reduction education, resulting in the publication of a policy handbook; 2) a review of and recommendations on catastrophe-linked securities and the role of capital markets in supporting the financial mitigation of large-scale risks, aimed at governments promoting these instruments; 3) a review of current mechanisms used to quantify catastrophe losses within the OECD; and 4) a review of hazard risk mapping efforts in South East Asian countries.

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Introduction

On December 26, 2004, tens of thousands of citizens in countries surrounding the Indian Ocean, together with thousands of foreign visitors, felt the shaking of an earthquake. Many were unaware of the potential of a devastating tsunami following such seismic events. Much of the affected coastal construction was vulnerable to seismic vibration and tsunami inundation; during the preceding decades, coastal mangrove forests, which could have reduced the impact of a tsunami wave, had been systematically destroyed. At the cessation of shaking, most people did not immediately evacuate to higher ground. More than 250,000 people lost their lives in the tsunami that followed.

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