World Bank approves €100m Cat DDO to boost Croatia’s disaster resilience and recovery

This marks Croatia’s first Catastrophe Deferred Drawdown Option, a contingent financing instrument that provides immediate liquidity following a natural disaster declaration.

The World Bank Group’s Board of Executive Directors has approved a new project designed to significantly strengthen Croatia’s preparedness for natural disasters and reinforce the country’s institutional, physical, financial, and social resilience. The €100 million Disaster Preparedness and Resilience Development Policy Loan with a Catastrophe Deferred Drawdown Option (Cat DDO) will enable the government to rapidly access funds in the aftermath of a disaster, supporting swift emergency response and resilient recovery.

A High-Risk Country Facing Escalating Hazards

Croatia is exposed to a wide spectrum of natural hazards—including earthquakes, floods, landslides, heatwaves, droughts, and wildfires—with increasingly severe impacts due to climate change. Average annual economic losses are estimated at 0.8% of GDP, while the devastating 2020 earthquakes caused €16.1 billion in damages, equivalent to roughly 24% of GDP.

These risks are compounded by aging infrastructure, vulnerable communities, and institutional gaps. Insurance coverage remains very low, with only three percent of disaster losses currently insured. This leaves households and the national budget highly exposed, emphasizing the urgent need for stronger financial protection and targeted social support.

Croatia’s First Cat DDO: A Structural Boost to Risk Management

This marks Croatia’s first Catastrophe Deferred Drawdown Option, a contingent financing instrument that provides immediate liquidity following a natural disaster declaration. With a three-year drawdown period, the Cat DDO acts as bridge financing while other emergency funds are mobilized, helping the government to better manage fiscal shocks and protect priority expenditures.

Jehan Arulpragasam, World Bank Country Manager for Croatia, highlighted the transformative potential of the initiative:“This project gives Croatia the tools to respond to emergencies while building resilience needed to preserve lives, jobs and development gains. It is also supporting the government in building a safer, more equitable, and better-prepared country.”

Three Pillars for a Safer and More Resilient Croatia

The new program focuses on three key pillars designed to strengthen national resilience across multiple systems and sectors:

1. Strengthening Institutional Capacity and Infrastructure Management

Reforms will enhance the country’s ability to assess, maintain, and upgrade critical infrastructure. This includes institutional improvements to strengthen climate adaptation planning, disaster risk governance, and emergency coordination across agencies.

2. Boosting Resilience in Strategic Sectors

The Cat DDO supports reforms in high-impact sectors such as:

• Energy: facilitating greater renewable electricity self-supply to improve energy security and climate resilience;

• Tourism: scaling resilient infrastructure investments in a sector central to Croatia’s economy;

• Housing: prioritizing safety-driven upgrades of multi-apartment buildings, many of which are vulnerable to seismic activity.

These reforms aim to protect economic productivity, reduce hazard exposure, and promote sustainable growth.

3. Increasing Financial Resilience and Protecting Vulnerable Groups

The program encourages wider uptake of disaster insurance, helping reduce fiscal pressure and household vulnerability. It will also strengthen social protection systems to support an inclusive recovery, ensuring that low-income and at-risk groups receive adequate assistance after disasters.

Supporting Long-Term Partnership Priorities

The Cat DDO aligns with the Country Partnership Framework for Croatia FY25–FY30, which underscores climate resilience, risk management, and stronger public institutions as priority areas. It is part of the World Bank’s Crisis Toolkit, offering countries predictable funding when emergencies occur.

By integrating disaster preparedness into national planning and strengthening financial safeguards, the Cat DDO will help Croatia safeguard development gains, protect communities, and build a more resilient future in the face of growing climate and seismic risks.