Exposed to various natural hazards, in particular flooding and earthquakes, Albania has the highest level of disaster risk in Europe according to the World Risk Index 2019. An average of 30,000 people were affected every year by natural disasters, and more than 95 percent of municipalities were affected by at least one disaster during the period of 1995–2015.
The economic cost of such disasters is considerable for private and public assets. Climate change may further increase the severity and frequency of weather-related disasters. Albania has few risk financing instruments, and a large catastrophe insurance protection gap. In time of natural disasters, it relies mostly on budget reallocation, borrowing, and donor aid.
A recent report of the World Bank on Disaster Risk Finance offers a historic and potential disaster impact assessment, as well as an assessment of the current risk financing for natural disasters. By assessing and analyzing the funding gap, the report suggests risk financing strategies. The World Bank and the Government of Albania are working on developing risk financing strategies based on the report recommendations.