GLOSSARY OF TERMS
Accountabiltity
Accountability is being responsible for using power and resources properly, taking into account the views of those affected by decisions and actions, and being able to be held to account for the consequences of those decisions and actions. (Centre for Disaster Protection).
Adaptive social protection
Adaptive social protection (ASP) helps to build the resilience of poor and vulnerable households to the impacts of large, covariate shocks, such as natural hazard events, economic crises, pandemics, conflict and forced displacement. Through the provision of transfers and services directly to these households, adaptive social protection supports their capacity to prepare for, cope with, and adapt to the shocks they face—before, during, and after these shocks occur (the Centre, based on World Bank 2020).
Anticipatory action
Anticipatory action refers to actions taken before a crisis hits to prevent or reduce potential disaster impacts prior to a shock or before acute impacts are felt. The actions are carried out based on forecasts or predictions of how the event will unfold (IFRC 2022).
Attachment point
In non-proportional reinsurance, an amount over which a reinsurer agrees to start paying benefits (Reinsurance Glossary 2020).
Basis risk
Basis risk is the difference between an index and the shock that the index is supposed to be a proxy for. A payout triggered by an index may be higher or lower than the beneficiary's losses, leading to overpayment or shortfall respectively. Where there are differences of opinion amongst stakeholders over what the index is supposed to be a proxy for, the precise definition of basis risk can be contested. For example, disagreement may arise over whether an agricultural insurance product that uses a rainfall-based index covers drought-induced crop disease and pest damage (Centre for Disaster Protection).
Contingent credit
A type of pre-arranged financing whereby a loan is approved in advance of a crisis and is guaranteed to be provided to a specific implementer when a specific pre-identified trigger condition is met (Centre for Disaster Protection).
Contingent liabilities
Obligations to pay costs associated with a possible, but uncertain, future event. Because there is no obligation to pay unless the event occurs, contingent liabilities might not be formally listed as a liability on an organisation’s balance sheet. Contingent liabilities might be explicit or implicit:
explicit contingent liabilities are contractual commitments to make certain payments if a particular event occurs—the basis of these commitments can be contracts, laws, or clear policy statements;
implicit contingent liabilities are political or moral obligations to make payments, for example in the event of a crisis or a disaster—governments do not recognise these liabilities until a particular event occurs; implicit contingent liabilities are difficult to assess, let alone manage in a consistent manner, precisely because of their implicit nature (Centre for Disaster Protection).
Covariate shocks
Covariate shocks are those which affect many people in the same community at once; the experience of one household is highly covariate with that of other households in the community (Jalan and Ravallion 1999).
Crisis
A situation creating severe and widespread needs that exceed the existing local and national capacities to prevent, mitigate, or respond. This includes crises arising from a range and combination of hazards including conflict, weather and climate-related events and stresses, and disease (Centre for Disaster Protection).
Crisis financing
Funding and financing that promotes and specifically targets prevention, preparedness, and response to crises. It could take the form of: (i) cash flow to recipients (e.g. grants) that could be arranged in advance or agreed in real time; (ii) cash flow to and from recipients via a financial intermediary (e.g. loan or insurance) (Centre for Disaster Protection).
Crisis protection gap
The difference between total expected contingent liabilities of national or international responders (i.e. the costs they can expect to incur in responding to crises) and the expected funding available to meet these costs through pre-arranged financing mechanisms (Centre for Disaster Protection).
Crisis risk
The potential suffering and loss of life that could occur in a specific time period due to a crisis, determined probabilistically as a function of hazard, exposure, vulnerability and capacity (Centre for Disaster Protection).
Debt pause clause
A pause clause is a provision in sovereign debt contracts that enables the borrower to temporarily stop repaying debt service (interest, principal or both) for a pre-agreed period when a predefined event occurs. These built-in debt deferrals can be designed to be Net Present Value (NPV) neutral and not extend the instrument’s original maturity date. Also known as Climate Resilient Debt Clause or Natural Disaster Clause (Centre for Disaster Protection).
Development bank
Financial institution that offers financing (typically in the form of loans and grants) and complementary technical assistance, tied to explicit development objectives (Centre for Disaster Protection).
Development insurer
Financial institution that offers insurance and complementary technical assistance, tied to explicit development objectives (Centre for Disaster Protection).
Disaster
A sudden, calamitous event that seriously disrupts the functioning of a community or society and causes human, material, and economic or environmental losses that exceed the community’s or society’s ability to cope using its own resources. Though often caused by nature, disasters can have human origins (IFRC, n.d.).
Disaster risk financing
Disaster risk financing covers the system of budgetary and financial mechanisms to credibly pay for a specific risk, arranged before a potential shock. This can include paying to prevent and reduce disaster risk, as well as preparing for and responding to disasters (Centre for Disaster Protection 2019).
Disaster risk management
Disaster risk management is the application of disaster risk reduction policies and strategies to prevent new disaster risk, reduce existing disaster risk and manage residual risk, contributing to the strengthening of resilience and reduction of disaster losses (UNDRR n.d.).
Early Warning System
An integrated system of hazard monitoring, forecasting and prediction, disaster risk assessment, communication and preparedness activities systems and processes that enables individuals, communities, governments, businesses and others to take timely action to reduce disaster risks in advance of hazardous events (UNDRR n.d.).
Ex ante
Latin for ‘from before’. In the context of disaster events, ex ante instruments are arranged before the event, and ex ante decisions are made at that time as well (Clarke and Dercon 2016).
Fragility
The combination of exposure to risk and insufficient coping capacity of the state, system and/or communities to manage, absorb or mitigate those risks. Fragility can lead to negative outcomes including violence, the breakdown of institutions, displacement, humanitarian crises or other emergencies (OECD 2016).
Hazard
A process, phenomenon or human activity that may cause loss of life, injury or other health impacts, property damage, social and economic disruption or environmental degradation (UNISDR 2016).
Indemnity insurance
A (re)insurance contract which pays out compensation worth the ultimate net loss of a specific asset. This type of insurance can be useful in protecting high-value assets such as homes, where there is a relatively narrow scope of potential loss. Insurance payouts are determined based on an assessment of losses after an event has occurred (InsuResilience Global Partnership 2020).
Index
In risk finance, an index is an indicator or measure that is chosen to be a good proxy for a type of shock, and used to determine payouts. For example, tropical cyclone categories used as an index for property damage or area average yield as a measure of lost agricultural production. Modelled estimates of damage costs are also used as indices (Centre for Disaster Protection).
International crisis financing system
The network of entities that provide or receive international development financin in order to enhance, support or substitute for state provision to address the risks or impacts of crisis. There is no single cohesive ‘system’ in terms of governance, coordination or operation, but the term can be a useful short-hand to refer to the group of institutions and operational organisations involved in both the current international aid effort and the proposed future effort (the Centre, based on ALNAP 2018).
International development financing
International development financing includes official development assistance (ODA) and other aid-like flows, referred to in OECD DAC aid statistics as other official flows (OOF) (Centre for Disaster Protection).
International premium support
Premium support is international funding to pay for insurance premiums. It is paid to or on behalf of vulnerable countries or humanitarian actors to buy insurance coverage (Centre for Disaster Protection).
Official development assistance (ODA)
Often understood as ‘aid’. The official definition is: “Resource flows to countries and territories on the DAC List of ODA Recipients (developing countries) and to multilateral agencies which are: (a) undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms. In addition to financial flows, technical co-operation is included in aid. Grants, loans and credits for military purposes and transactions that have primarily commercial objectives are excluded. Transfer payments to private individuals (e.g. pensions, reparations or insurance payouts) are in general not counted.” (OECD n.d.).
Other official flows (OOF)
'Aid-like' flows from official donors to developing countries, which do not meet the strict definition of ODA, but which contribute at least in part to development. The official definition is: “Transactions by the official sector with countries on the DAC List of ODA Recipients which do not meet the conditions for eligibility as Official Development Assistance, either because they are not primarily aimed at development, or because they have a grant element of less than 25 per cent." (OECD 2023)
Parametric insurance
AA type of insurance that does not indemnify the pure loss but agrees before the event to make a payment dependent on an index. Also known as index insurance. (Clarke and Dercon, 2016).
Pre-arranged financing
Financing that has been approved in advance of a crisis and that is guaranteed to be released to a specific implementer when a specific pre-identified trigger condition is met. The trigger may be based on data or models related to impact, forecasts, or projections of need, or a declaration of emergency (or similar) by the specified respondent. The funding may be used for anticipatory action or in response to a crisis, either linked to a clear plan for a very specific purpose or general budget support (Centre for Disaster Protection).
Preparedness
The knowledge and capacities developed by governments, response and recovery organisations, communities, and individuals to effectively anticipate, respond to and recover from the impacts of likely, imminent or current crises. Preparedness can be distinguished between financial preparedness (e.g. the creation of budgetary or financial mechanisms to respond to a particular type of crisis) and delivery system preparedness (e.g. investments in enabling social protection systems to be able to scale up rapidly following a crisis) (the Centre, based on UNISDR 2016).
Prevention
Activities and measures to avoid existing and new crisis risks, including mitigation activities that lessen or minimise the adverse impacts of a hazardous event without fully avoiding the impacts (the Centre, based on UNISDR 2016).
Resilience
The ability of a system, community or society exposed to hazards to resist, absorb, accommodate, adapt to, transform and recover from the effects of a hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions through risk management (UNISDR 2016).
Shock-responsive social protection
Shock-responsive social protection is a term used to bring focus on shocks that affect a large proportion of the population simultaneously (covariate shocks). It encompasses the adaptation of routine social protection programmes and systems to cope with changes in context and demand following large-scale shocks. This can be ex ante by building shock-responsive systems, plans and partnerships in advance of a shock to better prepare for emergency response; or ex post, to support households once the shock has occurred. In this way, social protection can complement and support other emergency response interventions (European Commission 2019).
Social protection
Social protection, or social security, is a human right and is defined as the set of policies and programmes designed to reduce and prevent poverty and vulnerability throughout the life cycle. Social protection includes benefits for children and families, maternity, unemployment, employment injury, sickness, old age, disability, survivors, as well as health protection. Social protection systems address all these policy areas by a mix of contributory schemes (social insurance) and non-contributory tax-financed benefits, including social assistance (ILO 2017).
Sustainable development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs (UN 1987).
Total crisis financing
A sub-set of international development financing, which includes activities and flows to organisations whose primary purpose is to deliver prevention, preparedness and response to crises (Centre for Disaster Protection).
Trigger
A trigger is a predefined threshold of an index underlying a risk finance mechanism which, if exceeded, prompts a payout. A trigger may also leave an element of discretion to a designated party about whether or not to launch a response activity (Centre for Disaster Protection).
Vulnerability
The conditions determined by physical, social, economic and environmental factors or processes that increase the susceptibility of a community to the impact of hazards (UNISDR 2016).