Protection gap panel calls for tenfold increase in crisis finance

The High-Level Panel on Closing the Crisis Protection Gap, a group of 20 leaders from across sectors and geographies, has launched a new report “Crisis Protection 2.0: Future-Proofing Our World”.

After a year of deliberations, the report’s call to action is stark: the crisis protection gap is widening, and to meet increasingly frequent and severe shocks across the globe requires scaling the proportion of prearranged crisis finance.

This crisis funding needs to rise tenfold by 2035, the report warned, especially for the least developed countries and small island developing states.

“In a world where risks can be modelled with ever greater precision, we should not wait to react until a crisis occurs,” said co-chair of the High-Level Panel, Sir Mark Lowcock.

“Nor can millions of people in vulnerable communities be left dependent on underfunded, ad hoc financial appeals where more effective financing instruments exist,” he added.

The panel provided ten recommendations intended to make this transition happen over the next decade, with actions described for governments, public finance providers and international financial institutions, as well as public and private insurance providers, and civil society to shift towards much more prearranged planning of finance for disaster response and recovery.

Of the $76bn spent on crisis finance in 2022, less than 2% was prearranged, according to research by the Centre for Disaster Protection.

Of this already tiny proportion, only 1.4% of that reached low-income countries.

Another way to understand this: less than $1 of every $5,000 of crisis finance goes to low-income countries in the form of prearranged finance.

Annual global economic losses from unmitigated climate change are projected to range between $7 trn and $38 trn by 2050.

To address these costs, the High-Level Panel is calling for a transformation in the level of effort dedicated to transferring risks from public balance sheets to capital markets.

“With human and economic costs already mounting, the world cannot afford to continue treating crises as unexpected surprises,” said Arunma Oteh, co-chair of the High-Level Panel.

“This is not just about the quantity but also the quality of finance which is being provided. Reactive funding is too slow, too costly, and leaves the world needlessly exposed. Prearranged finance must become the default for all predictable and modellable crises, not the exception,” added Oteh.

Key messages from Crisis Protection 2.0 report

• Scale prearranged crisis finance tenfold by 2035: Increase from 2% today to 20%, with a quadrupling within three years.

• Risk-informed country leadership is essential: Countries - supported by international and regional partners - must be proactive in planning for and managing crisis risks and integrating finance ministries into crisis planning.

• Tailored, adaptable solutions: Prearranged finance must be affordable, transparent, and adaptable to diverse risks and development levels and countries and communities better supported to to select the tools suited to their unique risks.

• Equity and inclusivity: Focus on fragile, conflict-affected, and vulnerable settings to ensure no one is left behind.

• Leverage insurance and capital markets: Tap into their potential to protect public assets and transfer financial risks.

• Enhance transparency: Improve accountability and measurement for publicly provided prearranged crisis finance to drive adoption and scale.

The report, “Crisis Protection 2.0: Future-Proofing Our World”, can be found here.