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

Accountability

Being responsible for decisions and resources, listening to affected people, and accepting consequences for actions taken.

Indemnity insurance

Insurance that pays based on assessed losses after damage to a specific asset.

Anticipatory Action

Actions taken before a crisis hits to prevent or reduce potential disaster impacts prior to a shock or before acute impacts are felt.

Vulnerability

Conditions that increase how severely people or communities are affected by hazards.

Risk profile

Underlying risks that an organisation or country is exposed to and the extent to which they are mitigated by pre-arranged finance.

Fragility

High exposure to risk combined with weak capacity to cope, often leading to crisis.