Bridging the Gap in Disaster Risk Financing through Integrating Physical and Financial Resilience : Disaster and Climate Adaptation Financing Framework

Overview & Synopsis

Developing countries are increasingly vulnerable to natural hazards, which cause extensive human, economic, and infrastructural damage. Between 2000 and 2024, over 7,200 disasters in these countries resulted in 1.25 million deaths, affected more than 4.6 billion people, and caused an estimated US$1.48 trillion in economic losses, accounting for nearly one-third of global disaster-related losses (United Nations Office for Disaster Risk Reduction, 2020) (Centre for Research on the Epidemiology of Disasters, 2021; 2022; 2023; 2024). A more integrated and proactive approach is needed. Building resilience must go beyond standalone physical risk reduction, financial instruments, or post-disaster recovery. It requires a comprehensive system that brings together physical risk reduction and financial solutions. Crucially, in addition to financing investments in physical risk reduction, disaster risk financing strategies and instruments must be embedded within environments and ecosystems that support planning, policy alignment, resilient infrastructure investment, and private sector engagement. Financial tools such as insurance, contingent credits, and recovery loans must be connected to real-world actions that reduce exposure and structural vulnerability, especially in housing and small businesses. To address these challenges, the World Bank’s Global Unit for Disaster and Climate Risk Management (IDURM) and the Global Facility for Disaster Reduction and Recovery have developed the DCAFF. The framework underscores the importance of integrating physical risk reduction efforts with financial solutions. It also offers a flexible, responsible strategy for assessing and enhancing ecosystems for building resilience, ensuring that physical and financial resilience efforts are effectively supported by policies, regulations, and institutional frameworks that maximize their potential impact. It helps countries move from fragmented, reactive responses toward a more proactive, comprehensive approach to disaster resilience.