Indonesia cat bond possible, as World Bank lends for disaster insurance

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The World Bank has approved $500 million of funding for Indonesia to help the country enhance its financial response to natural disasters, climate risks, and health-related shocks, with the use of risk pooling, and insurance or reinsurance instruments at the heart of the plan.

Between 2014 and 2018, the central government of Indonesia has spent between US$90 million and US$500 million annually on disaster response and recovery, the World Bank explained, while Indonesia’s local governments spent an estimated additional $250 million over the same period.

With the cost of natural disasters and severe weather events expected to keep increasing further due to climate change and also urban growth, the World Bank notes that these costs will pressure Indonesia’s government public spending.

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