4.27 **The Bank Group helps pilot OBA projects with grants provided through a multidonor trust fund financed by the DFID, the Netherlands, Australia, and IFC.** A similar initiative is IFC’s Performance-Based Guarantee Initiative (PBGI), which has dedicated US$250 million of funds to subsidies in infrastructure and small and medium enterprise (SME) projects. USAID and KfW are also supporting OBA projects in the health, water, and energy sectors. The State Secretariat for Economic Affairs (SECO) of Switzerland provided OBA funding for a joint IFC/IDA energy project in Tajikistan. AFD is involved in implementing OBA approaches in water and sanitation projects in Morocco, Kenya, and Cambodia.

4.28 **<u>Advisory services</u> constitute a significant component of the World Bank’s work in promoting PPPs for public service delivery.** Since 1999, the World Bank–managed _PublicPrivate Infrastructure Advisory Facility_ (PPIAF) has funded more than US$130 million in technical assistance (TA), facilitated more than 100 transactions, and strengthened more than 50 institutions **.34 IFC** has also allocated $100 million to _Infra-Ventures_ , which assists private sponsors with prefeasibility studies and risk capital in order to promote private investment in power, water, and municipal services, and transport. Finally, between 2000 and 2008, IFC advisory mandates on PPPs helped mobilize US$10 billion in investment, US$1.7 billion in concession fees and other fiscal benefits for governments.<sup>35</sup>

# _Sovereign Catastrophe Risk Finance_

4.29 **In recent years, there has been growing recognition that exogenous shocks are more frequent and costly in developing countries.**<sup>36</sup> According to the OFDA/CRED International Disaster Database, the estimated direct damage caused to developing countries alone by natural and human made disasters. Damages reached almost US$33 billion in 2007. As a result of underdeveloped local insurance markets, the estimated insured losses caused by natural disasters have remained stable at less than 5 percent in low-income countries over the past decade. Hydrometeorological events from droughts to floods cause 90 percent of the damage.

4.30 **Developing countries are recognizing, however, that they can no longer rely purely on** **_ex post_ relief and recovery measures.** Delays in provision of _ex post_ relief and recovery efforts compound the costs of crises. Also, following a disaster, funds in developing countries’ budgets are diverted from development objectives to immediate relief and then reconstruction. Donors covered an estimated 2 to 14 percent of economic losses from natural disasters, often with significant delays and disproportionate generosity for the most visible disasters.<sup>37</sup> 4.31 **Catastrophe risk finance is an important means of leveraging private finance to support** **_ex ante_ management of sovereign risks.** Specifically, risk management tools can help transfer a part of the government’s assessed financial risk or its contingent liability from catastrophe to the domestic and/or international insurance markets. Because domestic insurance markets are underdeveloped in most developing countries, development partners can help governments transfer sovereign risks to global capital markets.

4.32 **Even though catastrophe and sovereign risk financing is relatively new to development finance institutions, donors can help in coordinating and catalyzing the process, by supplying initial funding to cover startup costs, deploying capital, and providing**

> 34 PPIAF. _2008 Annual Report._

> 35 IFC. _2008 Annual Report._ 36 Guillermo Perry, 2009.

> 37 Cummins and Mahul, 2006.

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