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

Climate resilient debt clause or 'debt pause clause'

A provision in sovereign debt contracts that enables the borrower to temporarily stop repaying debt service for a pre-agreed period when a predefined event occurs.

Parametric insurance

Insurance that pays when an agreed indicator reaches a set level, not actual losses.

Crisis protection gap

The difference between expected crisis costs and funding already arranged to cover them.

Social protection

Policies and programmes designed to reduce and prevent poverty and vulnerability throughout the life cycle.

Shock-responsive social protection

Social protection systems adapted to scale quickly when large shocks affect many people.

International development financing

Public funding flows supporting development objectives in lower income countries.