ARC Ltd. And US Government partner to safeguard food security and expand parametric insurance in Africa
JOHANNESBURG, 13 February 2024 – African Risk Capacity Limited (ARC Ltd.) and the United States Government (USG) have entered into a landmark US$11.7 million partnership to safeguard food security and strengthen climate resilience in Africa by increasing access to parametric insurance. The project aims to protect vulnerable smallholder farmers facing increasing climate change-related disasters while assisting African governments to better respond to climate risks. Parametric insurance provides rapid payouts based on pre-agreed triggers, allowing timely responses to natural disasters. The USG funding will enable ARC Ltd. to scale up technical assistance in-country and increase coverage across Africa over the next three years. Says ARC Ltd. COO Ange Chitate, who heads up the project: “ARC Ltd. is committed to protecting the livelihoods of farmers and pastoralists across our African Union member states. Our priority with this grant is to provide coverage to 19 states, and with the support of the USG, we will refine and develop innovative products that will meet the evolving needs of these countries.” The project has two primary objectives. Firstly, governments will be assisted with capacity building to manage climate change-induced disasters through the effective use of parametric insurance. To this end, ARC Ltd. will work closely with governments to customise risk models for each country, establish contingency plans and integrate parametric insurance into policy frameworks. This localisation helps ensure that the insurance payouts will meet the real needs on the ground. Secondly, the project seeks to increase the uptake of parametric insurance through close cooperation with the African Union and regional economic communities to encourage adoption. It will also focus on aligning domestic policy frameworks with regional policies to embed parametric insurance in existing climate adaption frameworks. Increasing climate change impacts requires responsive diversification to ensure the project’s long-term sustainability and ARC Ltd. is committed to expanding its portfolio to cover more countries, hazards and people. Plans include developing demand-driven micro/meso insurance and diversifying beneficiaries, such as pastoral farmers locally and humanitarian organisations internationally. Various activities have been identified to achieve the objectives. On the technical side, ARC Ltd. will further refine and develop new products for member states with a focus on drought, flood and tropical cyclone models. ARC Ltd. will also work more extensively with technical and financial partners, UN agencies, international financing institutions and universities to identify how data can be used for increased evidence-based policy decision-making and impact measurement. To pave the way for more countries to participate in the risk pools, ARC Ltd. together with ARC Agency, will align technical, governance, and policy capacity with the risk pool requirements by hosting risk transfer workshops in select countries. Training local experts is also a key focus. ARC Ltd. will also complete policy underwriting for single and multiperil cover, having identified the countries that qualify for each. The USA aims to help more than half a billion people in developing countries to adapt to and manage the impacts of climate change through President Biden’s Emergency Plan for Adaptation and Resilience (PREPARE). With this partnership, it has strengthened its strategic interests in disaster risk financing in Africa while signalling its commitment to investing in locally led climate solutions. For ARC Ltd., this project aligns with its mission to safeguard more nations and create effective pan-African climate response systems. “ARC Ltd. has set an ambitious goal of protecting the lives and livelihoods of 700 million vulnerable people in Africa by 2034,” says ARC Ltd. CEO Lesley Ndlovu. “The partnership with the United States Government, and others, will help us achieve this goal. It also demonstrates the commitment of developed nations to building the resilience of the global south to withstand climate disasters.”
Rising climate death toll in Africa underscores urgency for COP28 action
JOHANNESBURG, 28 November 2023 – It’s been a year of climate carnage in Africa. At least 15 700 people have lost their lives to extreme weather disasters, according to the latest report from Carbon Brief, while another 34 million have been affected. From flooding to intense heatwaves and drought, these devastating statistics represent a human emergency on an unprecedented scale, which comes as the global community prepares for COP28. Even more sobering is that the bulk of the fatalities were in Libya alone. More than 11 300 people died in September when Storm Daniel caused two dams to overflow in the coastal city of Derna. In the catastrophic flooding that followed, people and buildings were washed out to sea. Researchers believe climate change was to blame for increasing the probability and intensity of this extreme weather event by as much as 50%. More than 20 other flood disasters occurred across the continent, affecting numerous countries. In early November, Kenya experienced torrential rains followed by flooding that forced 4 000 families to flee their homes. As many as 1 000 livestock died and 97 hectares of cropland were wiped out. In the aftermath of floods, communities face further challenges – the risk of waterborne diseases, food shortages, and the daunting task of rebuilding. Tropical cyclones are also happening with alarming regularity, battering coastlines, flattening villages, and wiping out the economic lifelines of many communities. Tropical Cyclone Freddy, which began its path of destruction in February, persisted for 34 days. Impacting Madagascar, Mozambique, Mauritius, Malawi, Réunion, and Zimbabwe, it left at least 860 people dead, destroyed homes and cropland, and caused cholera outbreaks in its wake. In contrast, the Horn of Africa has been gripped by persistent drought conditions, impacting more than 29 million people. The communities in the region are dependent on rain-fed agriculture and pastoralism, but the prolonged drought, said to be the worst in some 40 years, has turned arable land to dust, caused crop failure, water scarcity and decimated livestock herds. The ripple effect is huge – people are forced to leave their homes in search of pasture and water, resulting in mass population displacement. Malnutrition rates, especially among children, have soared and as many as 4 million people in the region are now acutely food insecure. Scientists weigh in A group of international scientists has concluded that human-induced climate change increased the severity of the drought in the southern part of the Horn of Africa, which includes southern Ethiopia, southern Somalia, and eastern Kenya. They say the likelihood of such droughts has increased 100-fold. “State fragility and conflict, as well as the length of the drought played a significant role in worsening outcomes, especially for people in Somalia. Further, the severity of impacts linked to the long duration of the drought also raises serious questions about the length of droughts that government drought management systems and the international aid infrastructure should be prepared to handle in the future,” they point out. This year has also seen heatwaves across Southern Africa and extreme heat in Northern Africa, especially Algeria, which led to deadly wildfires. While heatwaves are not officially categorised as disasters, their impact on populations is significant. Climate scientists explain that in addition to climate change, extreme events are also compounded by the El Niño weather phenomenon. The Carbon Brief report points out another critical issue – the lack of weather stations in Africa, which makes it difficult to track and record extreme weather events, thereby contributing to underreporting. This is particularly true for heatwaves, which are often not recorded due to the absence of observable impacts like those seen with floods or cyclones. The lack of data and reporting on these events makes it challenging to prepare for and mitigate their impacts. The scale of disasters The combination of climate change, poverty, and action (or in-action) in Africa paints a complex picture. Natural disasters push vulnerable communities to the limits of their resilience, while poverty hampers their capacity to recover. At the same time, a lack of in-country emergency preparedness and climate adaptation strategies leaves many nations on the back foot. This is where innovation and strategic public-private partnerships can make a significant difference. Recently, in Malawi, African Risk Capacity Ltd., a parametric insurer the financial affiliate of the ARC Group, launched an insurance innovation to help the government expand the World Bank’s Social Support for Resilient Livelihoods Project already underway in the country. “It incorporates a risk transfer instrument and a risk-layering approach that will enable Malawi to safeguard more vulnerable households from climate shocks and guarantee faster access to financing,” explains ARC Ltd. Head of Business Operations David Maslo. “This social protection insurance innovation has significant potential for replication across Africa, while encouraging other governments and global organisations to take a progressive, collaborative approach.” Action for Africa The devastating impact of several extreme weather events in one year in Africa serves as a grim reminder of the consequences of climate change. This continental crisis must catalyse a transformative climate agenda that prioritises the vulnerable, and COP28 presents an opportunity for actionable and results-oriented strategies to take centre stage. The time has come to move beyond vision and mission to actively shape a future where extreme weather does not dictate the fate of Africa.
ARC Ltd and Floodbase Partner to Develop Parametric Flood Insurance Solutions for Africa
Brooklyn, New York, October, 19 – Today Floodbase announced a partnership with African Risk Capacity Limited (ARC Ltd.) to develop, distribute, and scale parametric flood insurance solutions across Africa. Flood risk in Africa is largely uninsured, resulting in economic fragility, agricultural instability, and community displacement. The sprawling nature of farmlands, along with the high-risk status of African countries, has made it difficult for insurers to structure adequate indemnity insurance. To help close this insurance gap, ARC Ltd and Floodbase will develop parametric flood microinsurance products that can be scaled across Africa to cover smallholder farmers against agricultural risk. Unlike indemnity insurance, these products can pay out within days or weeks when the magnitude of flooding exceeds a predetermined threshold. They will be designed with predetermined pricing and payout thresholds based on Floodbase’s 23 years of observed flood history. This approach enables a country-wide agricultural flood solution for at-risk farmholders to support the population from ARC’s African Member States to recover more quickly from flood catastrophes. “Since its inception in 2014, ARC has shown that the parametric insurance model works and is impactful. We’re excited to partner with Floodbase to complement our portfolio of innovative parametric solutions to support flood vulnerable communities across Africa, with the goal of helping them quickly rebuild and recover following damaging flood events” said David Maslo, Head of Business Development at ARC. ARC Ltd.’s region-specific specialization and distribution network, in combination with Floodbase’s unmatched flood data and expertise enables a significant step forward in mitigating the impact of flooding, insuring previously uninsurable flood risk, and fostering resilience across the African continent.
Charting Disaster Resilience: MOU Signals Sovereign Risk Pool’s Commitment
JOHANNESBURG, 17 October 2023 – A recent sovereign risk pools summit hosted by the Centre for Disaster Protection and Gallagher Re has resulted in a joint Memorandum of Understanding. Held on 5 October 2023, the summit facilitated strategic engagement for the CEOs of African Risk Capacity Limited (ARC Ltd, a financial affiliate of the ARC Group), the Pacific Catastrophe Risk Insurance Company (PCRIC), the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) including Central America, and senior advisors for the Southeast Asia Disaster Risk Insurance Facility (SEADRIF). These organisations form the Sovereign Risk Pools, established to serve sovereign climate and disaster risk insurance objectives of nearly 100 nations globally. The summit also welcomed representatives of the World Bank Group, Hiscox, the UK’s Foreign, Commonwealth & Development Office (FCDO), the Sustainable Markets Initiative, the Insurance Development Forum, the Global Shield and the Global Shield Solutions Platform. They joined strategic discussions about disaster finance trends and gaps, and how the Sovereign Risk Pools can collaborate to scale-up the availability of pre-arranged disaster finance to serve public disaster response needs. The Sovereign Risk Pool executives have agreed to cooperate under the joint MoU as follows: “We are pleased that the pools also agreed to collaborate more extensively to develop parametric models and to further explore meso- micro and replica schemes to complement sovereign-level risk transfer,” says ARC Ltd. CEO Lesley Ndlovu. “This is our area of expertise, and where we can share knowledge and best practices.” The pools also confirmed a shared interest in exploring the establishment of a joint reinsurance facility to serve global risk transfer access to global capital markets, which is needed in addition to base capital required to enable expanded insurance offerings to countries.
Upscaling and risk-layering for climate resilience in Malawi
JOHANNESBURG, 18 September 2023 – African Risk Capacity (ARC) Ltd. has come on board to assist the Malawi Government with an insurance innovation that will scale up the World Bank’s Social Support for Resilient Livelihoods Project (SSRLP) in the country. This will see Malawi’s flagship safety net – the Social Cash Transfer Programme (SCTP) – reinforced with a risk transfer instrument to provide additional liquidity for the response to future droughts. It forms part of an upscaling and risk-layering approach to protect additional vulnerable households against climatic shocks and ensure earlier and rapid access to funding. The Malawi National Local Government Finance Committee has been implementing the World Bank’s SSRLP since June 2020 to improve resilience through strengthening the national platform for safety nets. The project aims to build human capital among poor and vulnerable populations through Social Cash Transfers (SCTs), livelihoods support (LS), Enhanced Climate Smart Public Works (CSEPWP), as well as an option for scalable financing for SCTs to reach more affected households followings weather-related disasters. Currently, the SCTP includes a mechanism to scale up the response to droughts in six districts in Malawi. The government’s long-term vision, however, is that of making it a national mechanism targeting all 28 districts, and one that responds to a wider range of climate risks and leverages more sources of financing, including donor funding. To this end, the government has made significant investments in the SCTP registration and payment systems, and institutional decision-making processes, to mitigate delays in reaching vulnerable households with cash support at the onset of a drought. The approach also harnesses a new insurance product specifically designed for the government to fund this scale-up, underwritten by the parametric insurer and financial affiliate of the ARC Group, ARC Ltd. It will be partly used to cover the costs of scaling up the SCTP in the 2023/24 and 2024/25 agricultural seasons, should rainfall deficits occur. This will be complemented by additional flexible contingency financing to act as a deductible to the insurance product. Funding support for this is provided by the World Bank and the Global Shield Financing Facility. Introducing a shock-responsive mechanism Poverty is pervasive in Malawi, with 75% of the population living below the international poverty line. The economy relies on agriculture, which accounts for more than a quarter of the GDP, and a significant percentage of the population relies on rain-fed smallholder agriculture. However, increasing natural disasters, such as cyclones, droughts, and floods, have resulted in destroyed or failed harvests and food insecurity. “In the event of a disaster, the immediate reaction among individuals is to engage in negative coping behaviours to survive, such as selling assets like their livestock. This results in increased poverty,” explains Scalable Component Co-ordinator at the Malawi National Local Government Finance Committee, Mulder Mkutumula. By connecting Malawi’s social protection system — the (SCTP) — to disaster risk financing instruments, the government has been able to introduce a shock-responsive mechanism that scales up the early cash-transfer response to additional vulnerable households when rainfall levels and food insecurity indicate drought conditions. “Providing the very poor households with resources before the impact of a drought is felt, helps prevent negative coping behaviours,” says Mkutumula. Pre-defined triggers and pre-identified vulnerable households allow the government to model the potential cost of the SCTP scale-up mechanism, develop a cost-effective financing plan, and pre-arrange financing instruments. The financing plan is combined with a contingency fund for small scale-ups and the risk transfer instrument for larger scale-ups. Combining these two instruments provides the government with the financial resources required for the scale up. “The World Bank sees Shock Responsive Social Protection mechanisms as key to ensuring that financial support quickly reaches vulnerable households after a shock. Demonstrating how this can work is a vital contribution to investments in human capital resilience, investments that are so necessary as shocks become more frequent and potentially harmful. With the support of the Global Shield – Financing Facility, the government has combined social protection delivery mechanisms with a financing plan, which the risk transfer policy is one part of. We expect to learn a lot from the mechanism being implemented in Malawi.” Practice Manager for Social Protection and Jobs for East Africa at the World Bank, Robert Chase Application in the field The SCTP scale-up mechanism was first implemented during the 2021/22 rainy season in the three districts of Blantyre, Ntcheu, and Thyolo. Around 74,000 households were made eligible for a cash transfer. A drought, followed by compounding shocks, resulted in an additional cash transfer for approximately 320,000 individuals totalling US$6.3 million, which the government withdrew from its contingency reserves. For the 2022/23 season, the mechanism was expanded to cover three additional districts, namely Chiradzulu, Karonga and Nkhotakota, and reached 500 000 people (about 100 000 households) in the six districts where it was implemented. Building on innovation with innovation “ARC Ltd. and the Government of Malawi designed the insurance product so that it is aligned with country’s existing triggers for the SCTP scale-up mechanism. This is a ground-breaking innovation for ARC,” says Head of Business Development David Maslo. He adds that the development of insurance products for social protection is growing in Africa, fuelled by a great need. “This new product is a step in the right direction towards managing the impact of climate change in Africa so that all those impacted will be assisted. It is a model to replicate throughout the continent.” Maslo points out that combining financial instruments and following a risk layering approach can help address the cost of the disaster response. “The structure of the policy is such that the Malawi Government retains some of the risk through their contingency fund. It also enables the triggering of the insurance product for more severe droughts and increases the overall coverage and value proposition. In this way, diverse financial instruments are used appropriately and optimised to enhance the disaster risk financing strategy of the government. “This is also complemented by the ARC Sovereign insurance policy, which covers some of the other response costs
ARC Ltd releases 2022 Annual Report
JOHANNESBURG, 11 September 2023 – A record total payout of US$60 million in 2022 is among the highlights detailed in ARC Ltd.’s integrated annual report, together with significant strides in innovation to safeguard African nations from the increasing risks associated with climate change. The payout was the largest since the company’s inception in 2014, underpinning the value of the company’s work as Africa’s first sovereign parametric development insurer. In 2022, ARC Ltd. covered 18 million people in countries prone to drought and tropical cyclones. Since 2014, the company has paid out US$125 million across eight risk pools, making a significant difference to the lives and livelihoods of at-risk communities. Chairman of the ARC Ltd. Board, Dr Abdoulie Janneh points out that this accomplishment was made possible due to a network of support: “Our donors and partners stood with us as we sought to protect the most vulnerable from climate change impacts in Africa. No one person or organisation can make the impact alone, and we are heartened that behind ARC Ltd. is a powerful and dedicated group of stakeholders, who are fully committed to our success. Together, we faced unprecedented challenges, but also achieved significant milestones.” These milestones include Comoros and Somalia joining the pool as ARC Ltd. focuses on expanding its member states, thereby covering more people. It has set the ambitious target of covering 200 million people annually by 2025 and positioning itself as the continent’s leading institution for disaster risk financing. Innovation and product diversification are central to this and 2022 saw the launch of two new products: flood risk, and outbreaks and epidemics (O&E). Malawi and Togo piloted flood risk, while Uganda piloted O&E, with Senegal becoming the first member state to sign up for the O&E policy. Despite an increasingly difficult environment, ARC Ltd. also made strides in expanding its non-sovereign and micro/meso insurance portfolio. Explains ARC Ltd. CEO Lesley Ndlovu: “The global macroeconomic environment experienced a weakening trend, leading to diminished financial capabilities of our member states. This reduced their ability to afford insurance premiums, as national priorities, such as healthcare and education, competed for limited resources. The effect of these challenges was evident in 2022.” Ndlovu says it is only with the assistance of donors and partners that disaster risk insurance can be made more accessible. In 2022, ARC Ltd. was supported by the Swiss Agency for Development and Cooperation (SDC) for the launch of the Outbreaks and Epidemics product through capital and premium contributions. A leader in ESG In terms of company successes, the annual report highlights ARC Ltd. receiving the global insurance industry’s top environmental, social and governance (ESG) score, following an evaluation by ESG research, ratings and data company, Sustainalytics. ARC Ltd. moved from low risk to negligible risk, improving by two positions, and at 5.7, its ESG risk rating is the lowest among its global peers. ARC Ltd. also leads in the Diversified Insurance sector, with the lowest exposure among its peers (24.0) and the strongest management score (80.3). It also scored negligible risk ratings for data privacy and security, corporate governance, human capital, business ethics and ESG integration. Looking ahead at goals for 2023, Ndlovu says ARC Ltd. remains focused on new products and tailoring solutions for individual countries to meet their needs. The company also wants to expand its Replica programme by partnering with more humanitarian organisations and launching the programme in additional countries. “The urgency for disaster risk insurance has never been greater, given the escalating frequency and intensity of perils, but with the support of our stakeholders and the collective efforts of our exceptional team, we are poised to continue making meaningful strides in the fight against climate change,” concludes Ndlovu. To view ARC Ltd.’s 2023 integrated annual report go to https://bit.ly/467RiFg
Fitch upgrades ARC Ltd.’s Outlook to Stable with an IFS Rating of ‘A-‘
JOHANNESBURG, 13 July 2023 – Fitch Ratings has upgraded African Risk Capacity (ARC) Limited’s outlook to stable with an Insurer Financial Strength (IFS) rating of ‘A-‘ and a Long-Term Issuer Default Rating (IDR) of ‘BBB+’. The credit rating agency notes the upgrade is due to ARC Ltd.’s “strong progress in terms of meeting its development objectives, demonstrated by enhanced claim payouts to affected African sovereigns, product diversification and improving the reach of its development activities. Strong progress in product diversification initiatives and the improving franchise have also led to a higher company profile score of ‘bbb’.” Fitch has referred to the commitment and credit quality of ARC’s sponsors. The company enjoys the support and sponsorship of the German development bank KfW through the Federal Ministry for Economic Cooperation and Development (BMZ), and the UK Foreign, Commonwealth and Development Office (FCDO). This is in the form of capital contributions, governance oversight and premium subsidisation. ARC Ltd.’s specialisation as a parametric insurance provider and its strong track record in claims payouts have boosted its company profile. The introduction last year of an outbreaks and epidemics product followed by a flood risk product this year have strengthened and diversified its portfolio. “ARC’s operating scale remains small, with reported gross written premiums of USD23 million in 2022, a drop from USD31 million 2021 due to the non-renewal of some contracts during the year. However, premiums so far in 2023 have strongly recovered and Fitch expects the company’s growing reach and diversification initiatives to support growth in the medium-term,” the rating agency stated. Fitch deems ARC Ltd.’s capital position as another key driver for the upgrade. “We regard the end-2022 USD68 million returnable capital provided by KfW/BMZ and the FCDO as fully loss-absorbing, and consequently treat it as equity capital when assessing capitalisation and leverage. On this basis, ARC scored ‘Extremely Strong’ on Fitch’s Prism Factor-Based Capital Model (FBM) based on end-2022 figures, unchanged from 2021.” The rating agency says it expects that ARC Ltd. could garner further capital support as it continues to achieve its development goals. Meanwhile its regulatory capitalisation remains strong, with a Bermuda enhanced capital requirement (ECR) ratio of 387% at end-2022 (2021: 796%). Comments Lesley Ndlovu, ARC Ltd. CEO: “We welcome the Fitch upgrade and see it as a reflection of our efforts to protect African nations from the increasing impact of climate change. It is also an acknowledgement of our drive to diversify our portfolio – we now cover the four major perils of drought, flood, tropical cyclone, and outbreaks and epidemics. Going forward, we will continue with our mission of signing up at least 35 African countries and covering more than 200 million people annually by 2025.”
The ARC Group announces a USD 2.5 million insurance payout to the Togolese Republic’s recovery from drought
JOHANNESBURG, 3 May 2023 – As the West and Central Africa region counts the cost of the recurring drought events that have swept through parts of the region, particularly during the 2022 agricultural season, the African Risk Capacity (ARC) Group recently made an insurance payout of USD 2.5 million to the Government of the Togolese Republic to honour the conditions of the sovereign insurance policy taken out by the country to cover this risk. In line with its mandate to work with African Union Member States to help them to better plan, prepare and respond to climate-induced threats and disease outbreaks, ARC has been working with Togo since 2017 to strengthen its response capacities to drought events. The Togolese Republic first participated in ARC risk pools for drought during the 2019/2020 agricultural season. Togo’s participation in the 2022/2023 ARC risk pool enabled the country to transfer its risk onto international markets via ARC Limited (Ltd), a mutual insurer owned by the African Member States and the commercial affiliate of the ARC Group. ARC Ltd has been providing risk pooling services to African Union (AU) member states since 2014, and this payout makes another strong case for the role of parametric insurance in building a country’s resilience to climate-induced threats. “It’s been a great honour to work with the Togolese Republic on its journey to build the country’s resilience to the threats paused by drought events. This payout will reach the most vulnerable, and is a confirmation of the need for countries to proactively manage their risks in the face of growing climate threats”, said Lesley Ndlovu, CEO of ARC Ltd. Togo’s insurance policy in this ARC risk pool was made possible by an insurance premium paid in part by the government, with premium support contribution from the Africa Disaster Risk Financing Programme, a framework developed as a collaboration between the African Development Bank and the ARC Group, funded by the Agence Française de Développement (ADRiFi AFD). Togo’s 2022/23 agricultural season was marked by pockets of intermittent dry spells in the north, particularly during the sowing window. The dry spells that lasted longer than 10 days caused a reduction in yield and agricultural production at the end of the season. According to the AfricaRisk View, ARC’s technical tool for monitoring the season, 689,267 people were affected in the prefectures of Savannes, Kara, and Central. To implement planned payout activities, the Government of the Togolese Republic will be guided by a pre-agreed Final Implementation Plan developed as part of the ARC contingency planning process that is facilitated by ARC Agency, which is responsible for working with member states to ensure their preparedness to manage such disaster events. Funds received will be used to implement a mobile money cash transfer response where 9,920 households will receive USD $71.4 every month for three months to help them cope with the impact of the drought. Not only will this cash transfer contribute to food security for beneficiary households but it will also prevent them from resorting to negative coping mechanisms such as selling off productive assets. To reach beneficiaries efficiently, the government will be supported by various stakeholder groups, including the National Agency for Civil Protection (NACP), the Agricultural Statistics, Information and Documentation Directorate (DSID), the Ministry of Agriculture, Livestock and Fishery Production (MAPAH), None-Governmental Organisations, Civil Society Organisations, and the local government. “The ARC mechanism is designed to support AU member states in their fight against climate-induced threats and disease outbreaks and to provide country-specific solutions based on needs. We are happy that Togo is taking action to protect vulnerable populations. We look forward to a continued relationship with Togo as we intensify efforts to strengthen response capacities and preparedness.” said Ibrahima Cheikh Diong, UN Assistant Secretary General and ARC Group Director General ARC’s unique value proposition enables it to provide innovative financial mechanisms to pool the risk of participating African countries and transfer it to international reinsurance markets to strengthen members’ Disaster Risk Management (DRM) systems.
The ARC Group announces an insurance payout to the Republic of The Gambian towards recovery from drought
JOHANNESBURG, 20 April 2023 – The Government of the Republic of The Gambia recently received an insurance payout of USD 187 641 following its participation in the African Risk Capacity (ARC) Group mechanism, designed to help African Union (AU) member states plan, prepare and to better respond to extreme weather events. The funds come at a time when the country is facing severe food insecurity and will support recovery efforts from the recent drought event and help the government reach the most affected populations. The payout, made by ARC Limited (ARC Ltd.), the insurance affiliate of the ARC Group responsible for risk pooling and transfer, is the result of a failed 2022/2023 agricultural season. The payment was made to the government in fulfilment of the conditions of the drought sovereign insurance policy taken out by The Gambia to cover this risk. Insurance taken out with ARC Ltd avails predictable finance to facilitate response to a disaster event of an agreed attachment point by a participating country. The Gambia’s participation in this ARC risk pool was made possible by an insurance premium paid in part by the government, with premium support contribution from the Africa Disaster Risk Financing Programme, a framework developed as a collaboration between the African Development Bank and the ARC Group, funded by the Agence Française de Développement (ADRiFi AFD). As drought conditions spread across West Africa’s Sahel region, The Gambia was amongst the most affected during the 2022/23 agricultural season. This led to late planting in the districts of Badibou, Jarra West, Kiang North Bank West, and Upper River North. According to the AfricaRisk View, ARC’s technical software for early warning and monitoring, a total of 153,902 people were affected, triggering a payout of USD 187,641. “We are thrilled to be making this payout to the Government of the Republic of the Gambia and look forward to seeing the difference it will make in the lives of affected communities. ARC has been working closely with the country’s Disaster Risk Management structures to strengthen its response capacities to drought, and this payout is the culmination of these efforts,” said Lesley Ndlovu, CEO of ARC Ltd. “The payout will go a long way towards facilitating timely response on the ground, especially given the existing contingency plans to guide the implementation response.” Through the Replica programme, a strategy which allows humanitarian actors to take out a policy on behalf of a country, Replica partner, the World Food Programme, which took out a policy on behalf of The Gambia, also received a payout of the same amount. This payout will also be used to implement recovery activities in the country and complement other efforts. The Final Implementation Plan, developed from ARC’s contingency planning process, will guide the use of the payout, and assist 17,058 people in the affected regions. The Republic of Gambia has chosen the use of a cash transfer to be managed through the National Disaster Authority (NDMA) to reach the most vulnerable. WFP will use the disbursement received in the same manner. In addition to abating increased food insecurity, the payout will also help prevent households from resorting to negative coping mechanisms such as selling off productive assets. Commenting on the payout, UN Assistant Secretary-General and ARC Group Director General, Ibrahima Cheikh Diong, reiterated the value of the ARC intervention, “The impact of disaster events goes beyond the immediate socio-economic costs and can reverse development gains that Africa has made. In the absence of instruments such as ARC, disaster events worsen food insecurity and can easily trap vulnerable populations into perpetual cycles of poverty.” He continued, “The effort from the Republic of The Gambia to build the country’s resilience is commendable. The government has continually demonstrated its willingness to fight the scourge of climate change towards protecting the lives and livelihoods of its people.” The ARC facility combines four critical elements of Disaster risk management: early warning, contingency planning, risk pooling and risk transfer to create a powerful value proposition and has proven to be an effective tool to improve a government’s preparedness to manage disaster events. Combined, this offering provides participating member states with access to immediate funds for early and planned responses to support vulnerable populations while strengthening response capacities.
African Risk Capacity Group and Djibouti Government sign first multi-year, multi-peril agreement in Africa to protect most climate-vulnerable communities
JOHANNESBURG, 17 MARCH 2023 – The Government of Djibouti has signed the first-ever multi-year, multi-peril agreement on the African continent with the African Risk Capacity Group (ARC Group) to protect the lives and livelihoods of its most climate-vulnerable communities. The ground-breaking agreement means that the country in the Horn of Africa now has access to five years of disaster risk management capacity building and disaster risk insurance coverage offered by the ARC Group, covering two of its most prevalent hazards – drought and excess precipitation. ARC Agency, a specialised agency of the African Union, assists African governments to better prepare, plan, and respond to natural disasters, which have increased in frequency and severity due to climate change. ARC Ltd., as its insurance affiliate, provides disaster risk financing mechanisms, such as risk pooling and risk transfer services, to help countries build resilience and recover faster after a disaster. Says Ibrahima Cheikh Diong, UN-Assistant Secretary General and Director General of the African Risk Capacity Group: “The Government of Djibouti has demonstrated yet again its leadership role in the region in the domain of disaster risk management by reinforcing its planning, preparation and response capacities against natural disasters. We at ARC are extremely proud to stand by Djibouti as we continue to provide demand-driven technical support and holistic solutions to the country and other member states to ensure that they are well-equipped to protect their most vulnerable populations against climate shocks.” The World Bank and the Global Risk Financing Facility multi-donor fund have provided US$2 million to underwrite the insurance policy. Says Boubacar-Sid Barry, World Bank Resident Representative in Djibouti: “This is a first for Djibouti and underscores the World Bank’s commitment to support efforts that help communities to become more resilient and to adapt to climate change through the use of innovative financial instruments, including insurance.” Descartes Underwriting partnered with ARC in the past, bringing its expert technical and modelling capabilities, and understanding of risk to ARC’s work on the continent, which led to its involvement in Djibouti. The company utilises advanced data and machine-learning techniques to model underlying phenomena and unlock risk insights that better align with the realities of a shifting climate and risk landscape. Says Tanguy Touffut, CEO of Descartes Underwriting: “We were elated to contribute our scientific expertise to support a more precise understanding and modelling of the risks in Djibouti, and then to design and support the risk transfer of this customised multi-peril cover. We sent an underwriter to Djibouti as part of our commitment to the project, and to the productive collaboration between ourselves, ARC, the World Bank and the Government of Djibouti.” Alessandro Girelli and Charlotte Rougier, both underwriting managers at Descartes, explain that Djibouti is an arid country with no significant, permanent, surface-water source, and the goal of the insurance cover for drought was to cover the pastoral population, who are the most vulnerable to drought. Mainly nomadic herders, living in rural areas, they move according to the rainfall and the availability of fodder. “We custom-designed the index to align with both the rainfall seasons and migration patterns of the pastoral population. The index is also based on soil-moisture deficit and the policy covers the entire country,” Rougier says. While Djibouti has very low annual precipitation levels, it is also affected by extreme (high intensity over a short period) precipitation events that can cause devastating flash floods, with significant human and economic losses. “The focus of the excess precipitation part of the insurance coverage is on Djibouti-City, which comprises approximately 60% of the population. People living here are particularly vulnerable to extreme rainfall due to population density, the topography of the city and its coastal location,” explains Girelli. “Descartes is proud to have been involved in this pioneering work, and grateful to Generali Global Corporate & Commercial, which was also part of supporting this achievement. Our role is to revolutionise insurance in the face of climate change and provide cover to those most vulnerable to its impact. This is a space where we want to continue contributing.” While Djibouti was an original signatory of ARC’s treaty in 2012, according to Executive Secretary for Risks and Disasters Ahmed Mohamed Madar, this agreement now signals the government’s intensified efforts to mitigate the human and financial costs of natural disasters, simultaneously expressing confidence in its ARC membership. Says ARC Ltd. CEO Lesley Ndlovu: “Not only is this multi-year, multi-peril agreement ground-breaking in Africa, but it’s also the first time we are covering excess precipitation. Being able to build two unique, innovative risk products for Djibouti and being ready to launch in record time has set a precedent that we hope to replicate throughout Africa going forward.” He is quick to stress, however, that despite the fast turnaround, there is no compromise on delivering services such as contingency planning, the details of which are currently being finalised with the Djibouti government. “Our concomitant services remain critical, as always,” Ndlovu says. The signing of the agreement comes as the De-Risking, Inclusion and Value Enhancement of Pastoral Economies Project (DRIVE) is being launched to protect pastoralists against the effects of climate change in the Horn of Africa (https://projects.worldbank.org/en/projects-operations/project-detail/P176517). The financing of Djibouti’s multi-year, multi-peril policy is part of the DRIVE programme.