The Enabling Environment for Disaster Risk Financing in Cambodia: Country Diagnostics Assessment (December 2024)

Executive Summary

Cambodia is highly prone to natural hazards, in particular floods, droughts, and storms. The coronavirus disease (COVID-19) pandemic has also had a long-lasting and severe impact on the economy through medical costs, reduced productivity and unemployment during lockdowns, and interruptions to trade and supply chains.

This country diagnostic assesses disaster risk financing (DRF) in Cambodia and its enabling environment for the efficient and effective use of financing instruments and introduction of new ones. These can enhance the financial resilience of the country to such disasters, epidemics, and pandemics. The assessment covers risk retention and risk transfer instruments to the insurance, reinsurance, and capital markets.

An Asian Development Bank–World Bank methodology is applied to assess possible impediments to the effective functioning of self-insurance or risk retention financing instruments by the government. This methodology has been adapted to include pandemic and epidemic risk. Questionnaire responses about disaster risk retention instruments are complemented by analysis of publicly available information, discussions with national and local government agencies, and international best practices.

The modified version of the W&W Development Framework is used to accommodate international good practices and public and private sector stakeholders’ inputs. This allows insight into existing or perceived demand and supply barriers restricting the development of an enabling environment for disaster risk transfer instruments. Six areas relevant to the development of insurance and capital market solutions for DRF are reviewed within this framework. These include government policy; social protection policy; unlicensed competition; economic conditions; credibility of the insurance, reinsurance, and capital markets providers; and product appeal.

A risk-layered structure is proposed to stimulate, develop, and implement financially sustainable and scalable DRF strategies and solutions. The assessment makes recommendations to enhance the enabling environment for public sector DRF instruments, insurance, reinsurance, and capital markets solutions. The list of recommendations is presented as follows: