Non-economic loss and damage and effectiveness of financial instruments

There is a greater need to focus on non-economic loss and damage. These are the losses and damages for which there is no market value, for example loss of cultural and historical importance, loss of social cohesion, loss of biodiversity, etc. Economists may monetize them but there is no real world market value for them and the real challenge is making financial instruments work for non-economic loss and damages.
In an ongoing project on NELD, it has been realized that NELD could account as much as 50% of total loss and damages of any natural hazard we can think about and these NELD loss and damages could be much higher in developing countries than in developed countries where social support systems are weakly developed and most survival is based on falling back on to informal social networks that communities have. In addition, addressing NELD has potential to determine the economic recovery of communities as well in terms of the quality and speed of recovery.
So the question is how financial instruments can help address non-economic loss and damages or address factors contributing to such losses? Most financial instruments such as insurance are designed based on what is quantifiable and what can be monitized while lot of NELDs can’t be reasonably be quantified at the scale and by those players we have in mind such as local governments.
We realized that the decision support systems are poorly developed for taking decisions on non-economic loss and damage which includes the type of data collected and the capacities of those who collect and use that data for decision making. We realized that most post-disaster databases focus on economic losses and non-economic losses are underrepresented and this data becomes basis for assessing the risks which means to say that whatever the recovery we are achieving based on this information is only 50% maximum at best. The situation is not much different between developed and developing countries in terms of indicators.
In terms of efficacy of financial instruments for addressing NELD, we conducted participatory appraisals in Bangladesh and Japan with the help of analytical hierarchy process to compare various interventions in terms of their efficacy to address NELD. And despite the developmental differences, we realized that insurance is ranked the least in terms of its potential to address NELD and preparedness planning is always superior. The picture is same whether it is a developed country or developing country. The crucial aspect appears to be how the returns from financial instruments are spent and most often these expenditures do not fall in the purview of factors that aggravate NELD.
The efficacy of financial inclusion instruments is more to do with how they are designed and delivered than the financial tool itself. For example, it is not the insurance alone that matters, but how insurance instrument is designed in terms who is the beneficiary of pay out, who takes the decision on how to spend the pay out, what that insurance covers, what support services are provided along with the insurance etc. So, from this point of view, I think we need to discuss in depth about how best to design these instruments and delivered to the ultimate beneficiaries so that they are able to address the NELD.