The Organization for Economic Co-operation and Development says that governments must do a better job of preparing for future disasters.

Governments around the world need to be better prepared for large-scale catastrophes and take a more proactive role in working with the insurance industry and other players, OECD Secretary-General Angel Gurría told participants at the inaugural meeting of the OECD International Network on Financial Management of Large-Scale Catastrophes in Paris today.

“In a globalised economy, the domino effect of disasters goes beyond their economic and social impact on the countries directly affected. Recent years have seen a dramatic rise in the frequency and severity of catastrophes and the trend is towards greater vulnerability and larger losses,” noted the OECD.

Insured losses are only the tip of the iceberg given that numbers of people with insurance cover are very limited in emerging economies, it observed. For example, Hurricane Katrina in the southern U.S. last year inflicted an estimated US$135 billion of damage and insured losses of around US$35 billion to US$45 billion. By comparison, the floods in China in 1996 and 1998 inflicted US$24 billion and US$30 billion dollars in economic damages respectively but only between 1% and 3% of these losses were covered by insurance.

To tackle this issue, the Network, which is open to non-member countries, will focus on the financial management of different types of large scale risks, including natural catastrophes, accidental disasters caused by human intervention, terrorist acts and pandemics. It will also assess the extent to which financial sector institutions are prepared to withstand disasters from a financial and operational perspective, the OECD explained.