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).
This guidance note has been developed to help the increasing number of countries and organisations that are considering or using pre-arranged financing instruments.
Read moreThis Disaster Risk Diagnostic supports The Gambia’s efforts to strengthen disaster risk financing and recommends ways to build a clearer risk profile.
Read moreLessons for IDA from the UK Government’s approach to explicit contingent liabilities.
Read moreThis paper charts the evolution of the World Bank’s approach to crisis risk financing.
Read moreThis paper proposes an innovative approach to financing contingent liabilities using IDA.
Read moreShock-responsive social protection
Social protection systems adapted to scale quickly when large shocks affect many people.
Ex ante
Actions, decisions or financial arrangements made before a disaster or crisis occurs.
Disaster risk finance diagnostic
An analytical assessment of a country’s disaster risk profile.
Parametric insurance
Insurance that pays when an agreed indicator reaches a set level, not actual losses.
Crisis financing
Funding designed to prevent, prepare for and respond to crises before and after they occur.
Prevention
Actions taken to avoid or reduce the impacts of future crises and hazards.





