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The enabling environment for disaster risk financing in Nepal: Country diagnostics assessment (August 2019)

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Executive Summary

This country diagnostics assessment reviews the current disaster risk financing (DRF) landscape and enabling environment in Nepal, with a particular focus on risk transfer instruments—insurance, reinsurance, and capital markets.

The assessment is based on a modified version of the W&W Development Framework for accommodating international best practice as well as public and private sector stakeholders’ inputs. This framework allows insight into existing or perceived demand and supply barriers shaping and, in part, restricting the development of an enabling environment for DRF in Nepal. Within this framework, six areas relevant for the development of insurance and capital market solutions for DRF are reviewed: government policy; social protection policy; unlicensed competition; economic conditions; credibility of the insurance, reinsurance, and capital market providers; and product appeal.

A risk-layered structure is proposed for the stimulation, development, and implementation of financially sustainable and scalable DRF strategies and solutions in Nepal. The assessment identifies gaps and opportunities for enhancing the enabling environment for public sector DRF instruments, insurance, reinsurance, and insurance-linked securities through the capital markets. The table below recommends improvements to the DRF enabling environment. The diagnostics tool and a toolkit that describes proposed enabling environment actions and their importance as well as the DRF tools and instruments of general use, including a glossary of technical terms, complete the suite of documents for this technical assistance.

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