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CAREC Phase II

CAREC Phase II: Developing a Disaster and Climate Risk Transfer Facility in the Central Asia Regional Economic Cooperation Region

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Overview

This project builds upon the modelling and analytical work conducted under TA-9878 (https://www.globalquakemodel.org/proj/carec) and involves the preparation and implementation of a pilot disaster relief bond (DRB) that will be issued by the Asian Development Bank (ADB) for two countries, namely, the Kyrgyz Republic and Tajikistan. The pilot DRB will complement existing climate and disaster risk financing tools and will be structured to encourage the adoption of risk-reduction and climate-adaptation actions. It will also direct relief assistance to the most vulnerable groups, including women and small and medium-sized enterprises, through pre-agreed response plans developed with the pilot countries.


GEM's contribution to the project includes:

  • Build upon the work conducted under TA-9878, review modeling to ensure that it is up-to-date and aligned with the pilot countries’ and investors’ expectations

  • Update exposure data for the two pilot countries based on updated housing and socio-economic data

  • Update seismic hazard and risk modelling for the two pilot countries to serve as the basis for the DRB structuring and placement

  • Undertake historical events analysis for the two pilot countries, considering all potentially damaging events since 1907

  • Provide earthquake model outputs required to determine the trigger form, level of coverage, and size and positioning of the DRB (when the policy attaches, detaches and how much it pays), in close consultation with WTW, Munich Re, Verisk, ADB, and the pilot countries

  • Update the earthquake data underlying the user-friendly graphic interface developed in the previous CAREC project for the two pilot countries, to help illustrate modeling results and cost-benefits of the risk transfer options as well as disaster risk reduction measures, allowing capacity building, facilitating consultation workshops and supporting the decision process

  • Support the preparation of knowledge products on earthquake risk modeling and financing


Duration: 2025-2026

Objectives

Key objectives involved:


  1. Review existing risk modelling for earthquakes in the Kyrgyz Republic and Tajikistan, and update and perform more detailed and granular risk modeling, as required;

  2. Conduct dynamic risk analysis to estimate capital requirements, reinsurance options, and the impacts of various historical or possible future scenarios on the facility’s operations;

  3. Support capacity building workshops to enhance countries’ understanding of disaster risk, including insurance solutions, and the process required for making informed disaster risk financing decisions; and

  4. Provide modeling outputs through a transparent and user-friendly interface/tool to inform the terms and design of the facility’s initial product offering, ensuring that is both relevant to the countries and financially sustainable over the longer term.

Collaborators


Collaborators: Willis Towers Watson (WTW), GEM Foundation, Munich Re, Verisk


Funding partner: Asian Development Bank (ADB)

Location

  • Kyrgyz Republic

  • Tajikistan

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Project Data Sheet

Asian Development Bank (ADB) project materials - overview, project details, documents.

New ADB Program to Help Kyrgyz Republic and Tajikistan Respond to Disasters

The Asian Development Bank (ADB) has approved a $56.4 million program to help the Kyrgyz Republic and Tajikistan boost their capacity to respond to disasters.


Both countries are vulnerable to disasters, such as earthquakes and floods, but lack the fiscal capacity and risk transfer mechanisms to effectively respond to hazards. The Risk-Layered Disaster Relief Finance Program will enhance their financial preparedness through a combination of two pre-arranged ADB financing instruments targeting different layers of disaster risks.

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