Glossary

Contingent liabilities

Obligations to pay costs associated with a possible, but uncertain, future event. Because there is no obligation to pay unless the event occurs, contingent liabilities might not be formally listed as a liability on an organisation’s balance sheet. Contingent liabilities might be explicit or implicit: 

  • explicit contingent liabilities are contractual commitments to make certain payments if a particular event occurs—the basis of these commitments can be
    contracts, laws, or clear policy statements;
  • implicit contingent liabilities are political or moral obligations to make payments, for example in the event of a crisis or a disaster—governments do not recognise these liabilities until a particular event occurs; implicit contingent liabilities are difficult to assess, let alone manage in a consistent manner, precisely because of
    their implicit nature (Centre for Disaster Protection).
Learn more

This guidance note has been developed to help the increasing number of countries and organisations that are considering or using pre-arranged financing instruments.

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This Disaster Risk Diagnostic supports The Gambia’s efforts to strengthen disaster risk financing and recommends ways to build a clearer risk profile.

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Lessons for IDA from the UK Government’s approach to explicit contingent liabilities.

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This paper charts the evolution of the World Bank’s approach to crisis risk financing.

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This paper proposes an innovative approach to financing contingent liabilities using IDA.

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other key terms

Disaster risk finance diagnostic

An analytical assessment of a country’s disaster risk profile.

Risk retention

When governments retain and finance disaster costs themselves.

Attachment point

The loss level above which a reinsurer begins paying under a reinsurance agreement.

Crisis risk

The likelihood of harm or loss from crises shaped by hazards, exposure, vulnerability and capacity.

Disaster

A severe event causing widespread harm that exceeds a community’s ability to cope alone.

Hazard

A natural or human process that can cause injury, damage or disruption.