A recent study by the Coalition for Disaster-Resilient Infrastructure (CDRI) highlights the urgent need for Mauritius to adopt proactive disaster risk financing strategies. As a small island developing state in the Indian Ocean, Mauritius is highly exposed to climate-related risks, with significant economic vulnerabilities. The CDRI report provides a systematic analysis of the link between climate disasters, their impact on strategic infrastructure, and the direct consequences for public finances.
The study reveals that Mauritius' infrastructure is highly vulnerable to climate-related disasters, with the energy sector facing estimated annual losses of $14.9 million (approximately Rs 700 million) due to cyclones. When including floods, this figure rises to $15.6-16 million. Under a high-emissions climate scenario (RCP8.5), potential maximum losses could reach $53.9 million (approximately Rs 2.52 billion) for the energy sector and $26 million (Rs 1.2 billion) for the road network.
The report identifies several obstacles hindering Mauritius' ability to manage disaster risks proactively. The country relies heavily on emergency budget reallocations, reserve funds, and international aid after a disaster occurs. Access to international climate finance remains complex, and existing reserve structures are not adapted to the actual needs of infrastructure reconstruction. The study recommends diversifying financing mechanisms, including catastrophe deferred drawdown options, parametric insurance, and catastrophe bonds.
To address these challenges, the CDRI report proposes several financing options, including a Catastrophe Deferred Drawdown Option (Cat DDO), risk transfer mechanisms such as parametric insurance or catastrophe bonds, and multi-year budgetary allocations for climate and resilience projects. While Mauritius has taken initial steps towards sustainable finance, including guidelines for sustainable bonds issued by the Bank of Mauritius in 2021, it has not yet adopted key disaster risk financing instruments.
The study highlights that several infrastructure sectors in Mauritius are particularly vulnerable to climate-related disasters, including coastal power plants, overhead power lines, transformers, coastal roads, rural networks, and strategic bridges. These infrastructure are exposed to cyclones, floods, landslides, strong winds, and erosion. However, their prioritization is limited by factors such as a lack of geolocated data on assets and damage, high initial costs associated with applying resilience standards, and historically limited budgetary resources.
The report emphasizes that the economic impacts of disasters extend far beyond physical damage to infrastructure. Disruptions to supply chains, reduced working hours, lower tax revenues, and difficulties in key sectors such as tourism (which accounted for 13.6% of GDP in 2023) have rapid and widespread effects on the entire economy. These indirect losses often exceed the cost of repairing damaged infrastructure, underscoring the importance of disaster risk financing.
The CDRI report stresses the critical role of data in addressing disaster risk financing challenges. A significant challenge is the lack of reliable, geolocated historical data on damage, which limits the ability of the Ministry of Finance to accurately quantify potential liabilities, hinders the development of risk-based insurance and reinsurance products, and complicates the evaluation of resilience investment effectiveness. A centralized database on disaster-related losses is essential to addressing this gap.
Key points
- Mauritius faces significant economic risks from climate-related disasters, with estimated annual losses of $14.9 million in the energy sector.
- The country relies heavily on emergency budget reallocations and international aid, highlighting the need for diversified financing mechanisms.
- A centralized database on disaster-related losses is crucial for addressing data gaps and informing disaster risk financing strategies.
