Financial Protection against Disasters in Mozambique (April 2018)


Executive Summary  

Mozambique is prone to recurrent natural hazards, namely, droughts, earthquakes, floods, tropical storms (cyclones), and tsunamis. Sixty percent of the population lives along the coastline and are vulnerable to tropical storms.1 The recurrent natural hazards, according to the National Institute for Disaster Management (INGC), have been increasing in number and magnitude since 1960.   

Given the country’s risk profile, the public costs related to disaster management are significant and require diverse, harmonized and long-term actions by the Government and Partners. The World Bank and the Ministry of Economy and Finance (MEF) have prepared the present study on “Financial Protection against Disasters in Mozambique” as part of a forward-thinking agenda on disaster risk management.

The objectives of this study are: (i) to analyze the current funding mechanisms for disaster management in Mozambique, (ii) to investigate the financing gaps, and (iii) to suggest next steps to be taken by the Government of Mozambique under the leadership of MEF and INGC for the preparation and implementation of a Financial Protection Strategy against Disasters. The main components of this study are:

A discussion about Mozambique’s risk profile and the economic impacts of disasters in the country in the last twenty years;

A review of the current disaster budgetary process, which includes case studies on financing gaps for postdisaster emergency response and reconstruction phases;

An overview of the disaster insurance market, focusing on sovereign insurance and rural microinsurance;

A discussion on possible next steps by the Ministry of Economy and Finance, the National Institute for Disaster Management, and other institutions involved in disaster management to strengthen the State’s financial response capacity to disasters.   

Risk Profile and Impacts of Disasters in Mozambique

There is no comprehensive and up-to-date historical database that consolidates information on the occurrence of disasters in Mozambique and covers a relatively long period. However, the data collected from various sources including the Emergency Events Database (EM-DAT),2 DesInventar,3 and Ministry of Planning and Development, provide an overview of the country’s hazard profile.   

The Emergency Events Database (EM-DAT) recorded 71 events (droughts, earthquakes, floods, landslides, or storms) in Mozambique between 1956 and 2016.   

The DesInventar database recorded 1,315 events in Mozambique’s provinces (741 droughts, 437 floods, and 137 cyclones) in Mozambique between 2000 and 2012. In addition, Axco reported, besides the 2006 earthquake, a further five earthquakes in Mozambique since 2002.   

According to data (at 2016 values) extracted from various sources, the annual average losses and damages caused by disasters between 1984 and 2014 was MZN 4,129 million. However, the average between 2000 and 2014 (the period for which more detailed information is available) was MZN 7,543 million, suggesting that larger events (from 2000, 2001, 2007 and 2013) and increased exposure tend to cause greater damage and economic losses, but also that losses and damages recorded in previous years may be significantly underestimated.   

The World Bank Group is carrying out a nationallevel disaster risk assessment for cyclones, droughts, earthquakes, floods, and landslides. That is, the potential hazards, exposures, and vulnerabilities are being modeled for damages and losses.   

Preliminary results of the assessment indicate that, on average, floods in Mozambique affect 122,000 inhabitants and inflict (estimated) U$440 million in damages per year.   

The average annual damages caused by droughts in the agriculture sector are estimated at U$20 million, while a 100-year return period earthquake could cause damages of U$440 million or higher.   

In short, based on the information available, it is possible to conclude that Mozambique is exposed to multiple natural hazards affecting different regions of the country, with different magnitudes and impact. However, the lack of complete historical information on events makes it difficult to analyze the risk profile of the country and the provinces, including changes over time. This situation reflects the difficulties and shortcomings in the processes of collecting, assessing and managing disaster data.   

Improving the systems for recording and managing data on the occurrence of disasters in Mozambique could allow for more detailed analysis.