This paper assesses the high financial vulnerability to the impacts of extreme weather events of national governments, in particular developing countries and small island states. It highlights three main implications: (i) efforts to reduce risk need to be ramped-up to lessen the serious human and financial burdens; (ii) there is a case for country risk aversion implying that disaster risks faced by some governments cannot be absorbed without major difficulty; and (iii) financially vulnerable (and generally poor) countries are unlikely to be able to implement pre-disaster risk financing instruments themselves, and thus require technical and financial assistance from the donor community.