NATURAL BASED ASSET
Africa’s ecosystems, forests, wetlands, coral reefs, and mangroves, are natural buffers against climate hazards, reducing flood risk, protecting coastlines, and sustaining livelihoods. Extreme weather events can damage these assets, weakening their protective function and causing economic losses in tourism, fisheries, and agriculture.
How ARC Ltd’s Parametric Risk Transfer Works
Although ARC Ltd’s products currently focus on human and economic systems, the same principles can be applied to nature-based solutions:
- Parametric ecosystem cover – Triggers based on storm intensity, rainfall, or sea surface temperature can release funds for rapid ecosystem restoration.
- Integration into national policies – Governments can allocate part of sovereign payouts to repair mangroves, reefs, or forest areas after climate shocks.
- Partnership model – Collaboration with conservation organisations to design, finance, and implement restoration activities.
Concrete Use Cases
Global Precedents – Reef and Mangrove Parametric Covers
Innovative insurance models in the Caribbean and Pacific have demonstrated how parametric triggers can finance rapid ecosystem restoration:
In Mexico, The Nature Conservancy and partners developed a reef insurance policy that triggers payouts after hurricanes, funding the repair of damaged coral reefs to restore coastal protection and tourism revenue.
In Belize, parametric funding mechanisms have been used to support mangrove restoration following storm damage, helping maintain natural flood barriers and sustaining local livelihoods.
These cases show how similar approaches could be adapted for Africa’s coastal ecosystems, such as coral reefs in the Indian Ocean or mangroves along West African shores, to strengthen natural defences and safeguard dependent communities.