A modeling approach to improve financial disaster risk management

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The CATSIM (catastrophe simulation) model was designed by IIASA researchers to help policymakers, particularly in developing countries, devise public financing strategies to be implemented in both the pre- and post-disaster context. National data can be input into CATSIM allowing policy advisers to pose "what if" questions.

The model will then show the best combination of financial strategies to suit current national circumstances.


The CATSIM model was first developed by IIASA as part of research carried out for the Inter-American Development Bank's Integrated Disaster Risk Management Approach to support hazard-prone countries. This research for the first time identified countries with a potential "financing gap," that is, countries where disasters were considered highly likely to swamp the government's ability to finance the recovery process.

Subsequently, the model was heavily expanded. It now forms part of a new methodological approach in which risk management of natural disasters is being mainstreamed within development planning processes.

A stand-alone software application has been developed for use in policy workshops to make it easier for those responsible for implementing risk management strategies to understand the scientific basis of CATSIM, and thereby optimize their own interactive use of it. The CATSIM model was recently used in research for the World Development Report 2010 of the World Bank to identify vulnerability to natural disasters at a national level.

A new Web-based version of CATSIM is being developed which will provide custom data for countries that have participated in workshops to interactively assess their risk to extreme events. 

  • In 2010 CATSIM was used in research for the World Bank to estimate disaster risk in more than 80 countries.
  • CATSIM played a founding role in the Caribbean Catastrophe Risk Insurance Facility in 2006, being distributed to 10 Caribbean countries and two regional banks, the CDB and the IADB.
  • CATSIM was used by Mexico to assess earthquake risks in 2007. This led to the first-ever government-issued catastrophe bond against natural disasters.
  • CATSIM was used to help assess adaptation measures for the EU project, MEDIATION.

CATSIM-screen-23 © IIASA
How CATSIM works

CATSIM is a standalone application with an easy-to-use graphical interface that allows the user to define parameters for hazards, vulnerability, and elements exposed. CATSIM module 1 assesses risk; module 2 shows the costs and benefits of various financial strategies for managing risk, plus their implications for important indicators like economic growth or debt.

The user can change parameters and assumptions to show the appropriate financial strategies in the given circumstances. CATSIM can also calculate the optimal mix of pre- and post-disaster measures in potential disaster situations. Results of that research are displayed in a Google map layer.


The poorest and most vulnerable countries are often the worst affected by natural disasters like floods, hurricanes, cyclones, wildfires, earthquakes, and tsunamis. A disaster can be extremely costly, both in terms of carrying out the vital infrastructure repairs needed to keep a country going and also to provide relief for the people affected. Expenditure is usually met from the public purse (taxation, budgetary diversions) or through loans and donations from the international community.

Such funds may be unavailable at short notice, however. Thus pre-disaster financial instruments are important, for example, risk-transfer mechanisms, such as reserve funds, insurance, catastrophe bonds, and contingent credit lines.

Variants of the CATSIM model

The Inter-industry Impact Assessment and Stochastic Debt Assessment models are variants of the CATSIM model and are used by the Risk and Resilience Program to help understand the effects of natural disasters.