African Risk Capacity Limited and Milliman launch postgraduate scholarship programme for African students studying climate change risk
JOHANNESBURG, 16 MARCH 2023 – Africa’s premier institution for disaster risk financing on and for the African continent, African Risk Capacity Limited and Milliman, a risk management, benefits and technology company, have come together to launch a postgraduate Africa Scholarship Programme exclusively for African students. Aimed at studies relating to mitigating the impact of climate change on African economies, the programme will offer four scholarships to qualifying applicants, covering up to three years of full-time postgraduate study at select universities on the continent. The Africa Scholarship Program seeks to assist students who cannot afford postgraduate studies while promoting actuarial and related professions and gender equality. As such, female students are strongly encouraged to apply. Milliman will provide the funding, while ARC Ltd. has already leveraged its relationships in Africa to make the programme a reality and will oversee it going forward. Additionally, the Africa Scholarship Programme ties in with the critical work that ARC Ltd. does in Africa, where it has been providing disaster risk insurance to its member states since 2014, and Milliman’s social responsibility objectives, with the latter serving the full spectrum of business, financial, government, union, education, and non-profit organisations. Additionally, Milliman helps mitigate risk in vulnerable countries through their actuarial strengths and modelling frameworks. Says Christal Morris, Milliman Chief Sustainability and DEI Officer: “We also seek to diversify talent and change the landscape and the demographics of the actuarial industry – this aligns well with the scholarship programme in Africa. Our desire to bring more gender parity to the profession has always been prominent, and by being part of the programme, we can aid in bridging that gap to access and educational resources. “Our collaboration with ARC Ltd. presents an excellent opportunity to make a differential investment in demographic groups that don’t typically get this kind of attention. The programme has created the ability for both of our organisations to contribute in impactful ways.” With the synergy between the two organisations evident, it is CEO of ARC Ltd., Lesley Ndlovu, who is the architect of the Africa Scholarship Programme, as he himself was once given a helping hand. Ndlovu explains: “My passion for scholarships providing opportunities for students stems from my own experience as a student at the University of Oxford. I was a beneficiary of a scholarship which was the foundation of my career. Working with Milliman to set up our own scholarship programme is my way of contributing to expanding access to opportunities for the next generation.” Students will be able to apply to the following universities: They may choose from the following postgraduate degrees: With applications now open, students are encouraged to put themselves forward for this life-changing opportunity. A prerequisite, however, is that they must commit to working in an African country for two years after graduation. “We desire to see these graduates succeed, and therefore ARC Ltd. and Milliman will also be providing internships to give them a strong foundation in their chosen careers and an immersion in the challenges of risk management,” Ndlovu concludes. Details of the scholarship and the application form are available on https://africanscholarship.org/.
Madagascar has contingencies to aid its swift recovery from devastating impacts of tropical cyclones
JOHANNESBURG, 27 FEBRUARY 2023 – The unusually protracted journey cyclone Freddy led across the Indian Ocean this past month was a stark reminder of the vulnerability African nations like Madagascar grapple with, in the face of hazards such as tropical cyclones that could worsen with climate change. As the world watched Freddy travel a vast distance across the South Indian Ocean from the northwest coast of Australia to island nations thousands of miles away, Madagascar braced itself for another battering – just over a year after cyclone Batsirai wreaked havoc, one of four storms that hit the island nation that year. Moving across Madagascar last week, cyclone Freddy brought with it a storm surge of between one to two metres and 175km per hour winds, according to KinetiCast™, an online platform providing global insights on tropical cyclone hazards and impacts. KinetiCast™ is run by Kinetic Analysis Corporation, which created the tropical cyclone model for Africa’s premier institution for disaster risk financing on and for the African continent, African Risk Capacity Limited. The real-time-data it produces powers ARC Ltd.’s Tropical Cyclone Explorer and led to a pay out of US$10.7m to Madagascar last year to help the country recover from the effects of cyclone Batsirai. Kinetic Analysis Corporation’s CEO, Richard Murnane, explains: “We use data generated by official agencies such as the Joint Typhoon Warning Centre and Meteo France La Réunion, among others, to generate a geospatial footprint of the hazards associated with a tropical cyclone – winds, waves, storm surge and rainfall – as well as its impact and damage in terms of populations affected and purchasing power parity losses.” “In the case of cyclone Freddy, almost two million people in Madagascar were subjected to hurricane-strength winds and over 20,000 were in areas subject to storm surge,” Murnane adds. Due to its geographical position, Madagascar has borne the brunt of the south-west Indian Ocean cyclone season which runs from November to April. Last year, it brought several storms to the African island nation’s shores including the devastating cyclone Batsirai, tropical storm Ana, tropical storm Dumako and tropical storm Emnati. Besides the loss of life, these storms bring flooding, wind damage, destruction to property and infrastructure, and landslides. Villages and towns are cut off, people displaced, schools destroyed, and access to clean drinking water, electricity and supplies severely hampered. In the case of Batsirai, some 121 people were killed and 75,000 displaced. However, Madagascar is covered within ARC Ltd.’s parametric insurance risk-pooling facility – the first African country to have signed up for sovereign parametric cyclone insurance protection since the organisation launched its cyclone product in the second half of 2020. The country took out a policy, fully co-financed by KfW Development Bank and ADRiFi Multi-Donor Trust Fund. “Based on ARC Ltd.’s tropical cyclone model, we identified that more than six million people were exposed to cyclone Batsirai. Shortly after the cyclone, ARC Ltd. made a pay out of US$10.7m to enable the country to start rebuilding,” says Lesley Ndlovu, CEO ARC Ltd. “Our parametric insurance triggers ensure rapid deployment so that assistance can reach those who need it most and lives can be saved. Unlike traditional insurance policies, intended to return the insured back into the position they were in prior to an insured event, parametric insurance covers the probability of a predefined event happening instead of indemnifying actual loss incurred.” Without parametric insurance, vulnerable nations such as Madagascar would be unable to respond swiftly and effectively, to help build back better. ARC Ltd. already has 35 African Union members that have access to its ARC Ltd. risk transfer services. There are ongoing efforts to ensure that more countries sign up to support this mechanism and endorse it as Africa’s solution to the growing threats of natural disasters.
African Risk Capacity Limited awarded top ESG score in the insurance industry
JOHANNESBURG, 16 JANUARY 2023 – African Risk Capacity (ARC) Limited has received the global insurance industry’s top overall environmental, social and governance (ESG) scores. Conducted by Sustainalytics, a leading ESG research, ratings and data firm, the evaluation is a comprehensive assessment of an organisation’s preparedness to meet future risks and opportunities linked to ESG factors, such as climate change, regulatory risk and reputational issues, on a scale of 0 to 100, with 0 indicating the lowest risk. ARC Ltd.’s ESG score was calculated following an independent audit of the company’s business practices and policies. Improving from low risk last year at 10.2 to negligible risk this year at 5.7, Africa’s premier institution for disaster financing edges up two positions to claim top spot in the global insurance sector ESG risk rating. ARC Ltd.’s ESG risk rating is now the lowest among its global peers. ARC Ltd. also retained its leadership position in the Diversified Insurance sector this year, with the lowest exposure among its peers (24.0) and strongest management score (80.3) in terms of how well it manages its ESG programmes, practices and policies. In particular, ARC Ltd. scored negligible risk ratings in terms of Data Privacy and Security, Corporate Governance, Human Capital, Business Ethics and ESG Integration. ARC Ltd. Chief Operations Officer Ange Chitate says the organisation’s top ESG score in the insurance industry is reflective of the leadership role it plays in helping to mitigate and manage the impact of climate change on the African continent. “This independent validation of our commitment to sound ESG practices within the business bolsters our vision to cover the continent’s most vulnerable communities facing the vagaries of climate change events. We achieve this through partnerships with like-minded organisations that share our vision and commitment to sustainable ESG practices,” says Chitate. As a leader in ESG among stakeholders in Africa’s insurance sector, ARC Ltd. is a signatory and driver of the Nairobi Declaration, aimed at committing the continent’s insurers to better integrate ESG into their business models, in alignment with the goals envisioned by the Net- Zero Insurance Alliance. “We are determined to play an active role in promoting the economic, social and environmental sustainability that has become so crucial in the world today. All stakeholders within the African insurance industry – from risk managers to insurers and investors – have a critical part to play in promoting sustainable development on the continent,” says ARC Ltd. CEO Lesley Ndlovu. “We encourage others in the industry to take the initial step of becoming a signatory of the Nairobi Declaration, but also advise that it represents just the first footfall on a path towards numerous different activities and accommodations like those illustrated in our independent ESG risk assessment by Sustainalytics. We can all play our part,” Ndlovu concludes.
CASE STUDY: 2022 IMPACT
A year of impact & value – a record US$60m in payouts 2022 was the year in which ARC Ltd. intentionally set out to demonstrate value, impact and meaning on the African continent. Already in Q1, our mission to be impactful was evident with the highest payout in our history – $10.7m to the Madagascar Government, following the devastation of Tropical Cyclone Batsirai, which made landfall on 5 February. It claimed the lives of 121 people and displaced more than 61 500. The rapid payout ensured an early response, supporting the government’s emergency relief and recovery efforts in the country. Additionally, Madagascar had been impacted by food and water shortages and water-borne diseases. By the end of 2022, we had succeeded in our intention with a record disbursement of $60m for 14 payouts – the highest amount we have ever paid out in a single year. The 2022 payouts went to: Since its inception in 2014, ARC Ltd. has paid out a total of $125m in claims from eight risk pools. Currently, we cover more than 18 million people in Africa and although the need is far greater, our mission, to reiterate, is to cover 200 million by 2025. This significant impact of 2022 will now also be extended in 2023 due to the addition of two new perils – flood risk and outbreaks and epidemics. Delivering value We measure our impact by evaluating how effectively we have served the needs of vulnerable populations in our member states. ARC Ltd.’s gross payouts are derived from actual rainfall estimates from the beginning of the season to the latest dekadal (10-day) precipitation observed. We apply previously observed rainfall data from 2001, which is then used to create estimates of drought response costs and payouts. We also aim to strengthen the commercial capacity of insurance markets in Africa through our micro/meso product.
CASE STUDY: OUTBREAKS AND EPIDEMICS
According to healthcare experts, Africa has one of the weakest health systems in the world, making it prone to epidemics and outbreaks. This was evident in the 2014-2016 Ebola epidemic in West Africa, where healthcare systems were overwhelmed, and in which more than 11 000 people died in Guinea, Sierra Leone and Liberia. The World Bank estimated that the economic impact on the three countries amounted to as much as $2.8 billion. The epidemic revealed that slow and unpredictable funding was a significant factor affecting the ability of the countries to roll out a rapid response at the beginning of the outbreak. ARC’s lead advisor for Outbreak & Epidemics, Robert Kwame Agyarko, stated publicly: “Had Ebola been identified and the response begun two months earlier, the total number of deaths could have been reduced by 80%”. An outbreak in the Democratic Republic of Congo in the same year resulted in 2 200 deaths, and while in this instance, the response was much better, there were nevertheless significant social, political, security and economic consequences. A continent at risk In addition to Ebola, Africa is at risk of meningitis, Marburg virus disease and Lassa fever. Meningitis occurs across an area in sub-Saharan called the meningitis belt – from Senegal in the west to Ethiopia in the east – comprising 26 countries with an estimated population of 300 million. According to the Centres for Disease Control and Prevention, this region experiences significant epidemics every 5 to 12 years, reaching 1 000 cases per population of 100 000. Marburg virus disease, similar to Ebola, has a fatality rate of about 50%, according to the World Health Organisation, and an outbreak also heavily impacts healthcare systems and the socioeconomics of affected countries. Lassa fever is endemic to some West African countries with an at-risk population estimated as high as 59 million, with 3 million people in Sierra Leone, Guinea and Nigeria falling ill annually and a mortality rate of 67 000. A 2022 scientific study by Scripps Research and the University of Brussels found that climate change and other environmental factors will lead to fever spreading to the central and eastern parts of Africa in the next 50 years, with the result that the number of people at risk would increase by 600%. Ebola highlighted the critical need in Africa to insure against outbreaks and epidemics, and, amid the epidemic in 2015, African finance ministers approached ARC to develop a product that would meet this need and ensure rapid financing to help countries contain high-impact outbreaks, as well as complement the efforts of the Africa Centres for Disease Control and Prevention. The pilot phase In September 2017, ARC launched a pilot of its outbreaks and epidemics parametric insurance product, which would release payouts on detection of an outbreak. This would assist governments with relief funding to contain the spread, as well as deploy medical intervention without having to rely on traditional aid, which would take much longer. Early response has been documented to save more lives and prevent a worse crisis. The product focused on severe diseases, including Ebola, Marburg virus disease and meningitis, and was to be piloted in Guinea and Uganda due to previous epidemics there. To minimise ARC’s risk exposure, an entire epidemic could not be covered, however, the cost of government response would be covered. Before the Covid-19 pandemic, ARC was poised to launch the outbreaks and epidemics product to market but was forced to hold off. A first for Africa In 2022, the ARC Group and its partners were able to finalise the development of this product that would provide parametric insurance to member states for high-impact epidemic risks. Four diseases were chosen with proven, high human and economic costs: Ebola, Marburg virus disease, Lassa fever and meningitis. The product will help reduce mortality, the costs of outbreak response; the indirect costs of illness (household expenditures, lost productivity); and secondary impacts on the economy (disrupted markets, lost investment, etc.). This new peril added to ARC Ltd.’s natural disaster products is ground-breaking on the African continent, and in December, the first Outbreak and Epidemics insurance policy was issued to the government of Senegal. The maximum protection provided is US$5m. The parametric insurance product is supported by a capacity-building programme around epidemic preparedness, contingency planning for a swift and effective response, and outbreak risk modelling from simulated outbreaks. A rapid payout will be released in the event of an outbreak of a pre-determined magnitude. Recent history has shown that the threat of unforeseen diseases, epidemics and pandemics is ever-present and always catastrophic. With Senegal leading the charge in West Africa, it is hoped that other countries will follow suit and ARC Ltd. will continue engaging with member states in this regard. Structure of the O&E project: • Simple transparent trigger based on case numbers reported from creditable sources; Low case numbers trigger(s) to ensure early intervention with early pay out; • Three-year cover based on outbreak response cost needs of the country in question; • Cat bond is issued by ARC (sponsor) to reinsurers, capital markets and donors (investors) for a premium plus coupons; • Payout is equal to debt issue amount (principal) • Losses occurring during basis of cover: Events occurring in coverage period; • Single payout per cat bond tranche: each tranche pays 100% of pay out in contact when triggered: • If trigger event occurs and the cat bond pays out, the debt is forgiven; • Tranches of coverage per country staked at different probability of trigger thresholds. • Total payout cap is considered for now, corresponding to single event peak exposure but covering all four pathogens. Variation to this structure can be introduced.
CASE STUDY: FLOOD RISK IN NIGERIA
Droughts and floods have had the most significant humanitarian impact in Africa in recent decades. According to the World Meteorological Association, drought-related hazards in the last 50 years have left half a million people dead and resulted in economic losses amounting to $70 billion. Over 1 000 flood-related disasters claimed more than 20 000 lives during this period. Contributing factors to flood risk are climate change, rapid urbanisation, poor urban development and infrastructure, and overpopulation. As the impacts of climate change accelerate in frequency and severity, on a continent that has contributed the least to CO2 emissions, the need to protect the most vulnerable has never been greater. This is where insurance against natural disasters has an important role to play, however, in Africa, the uptake has been much too slow – only 3% of losses caused by natural disasters have coverage. Additionally, only 13 countries out of 54 have become signed up for the ARC Treaty and become member states. Since its inception in 2014, ARC Ltd. has offered parametric insurance to member states in Africa for drought and tropical cyclones. However, product innovation and diversification have become critical to expanding insurance coverage on the continent and attaining the company’s goal of 200 million people annually by 2025. Diversifying will help ARC Ltd. address individual countries’ climate financing and mitigation needs. To this end, the company has been working with several African governments to run pilot projects for additional products, such as flood risk. A new flood risk insurance product Some member states have national and regional flood early-warning systems, but economic loss estimation to underpin a sovereign insurance scheme is lacking. To address this, ARC partnered with JBA Risk Management to devise a probability approach that would support a customisable parametric flood insurance product. Pilots were run in Côte d’Ivoire, Ghana, The Gambia and Togo, while Malawi is currently piloting the flood risk product, and providing historical data and patterns, enabling ARC Ltd. to customise the risk model for the country. Having such a model will assist the Malawian government in making informed decisions about flood risks and identifying flood-prone districts where disaster coverage is needed. In November 2022, a technical advisory committee of senior flood experts from global institutions assessed the ARC flood risk model. It acknowledged that despite the level of difficulty, it was “reasonably robust and efficient in terms of describing the risks associated with flood events”. The ARC flood risk model was deemed ready for underwriting flood insurance policies, and ARC Ltd. earmarked early 2023 for the launch. Flood risk cover for Lagos State, Nigeria For Lagos State, floods continue to be a growing disaster risk due to several factors, including climate change and urbanisation. This has led to ecosystem depletion, pollution, inadequate drainage systems and the prevalence of poor and vulnerable communities. In the last decade, there has been a significant increase in the frequency of such events – 7.7 million people were affected, and assets worth over $9.5 billion were destroyed in 2012. Following heavy rain that began in early August 2022, Lagos State experienced flash floods and infrastructure collapse. A month later, floods across Nigeria were said to be the worst in a decade. Impacting 34 of 36 states, including Lagos State, the floods claimed more than 600 lives, and 1.4 million people were displaced. Compounding the socio-economic devastation of the loss of lives and livelihoods, the risk to food security when agricultural land is destroyed, and the damage to roads, property and infrastructure, is the fact that flood risk insurance does not play a significant mitigating role. Only multinational corporations, companies, and a few real estate owners have been signing up for coverage. This led to the launch of a sub-sovereign risk transfer scheme for Lagos State in November 2022. Intended to reach 8.5 million people by 2025, the €1.6 million project centres around a parametric insurance solution to be incorporated into Lagos State’s flood-risk-management framework. ARC Ltd. is among the strategic partners in this project led by the Insurance Development Forum, AXA Climate and Swiss Re and supported by the United Nations Development Programme. Other partners are AXA Mansard, the Nigerian entity of the AXA Group, Finnish microsatellite manufacturer and flood data provider, ICEYE, and JBA Risk Management, who are flood data specialists. The project seeks to compile and analyse flood risk data to create a customised insurance product, enable the mapping of vulnerability zones and help improve contingency planning and resilience in Lagos State. In the event of a flood, the parametric solution will pay out a pre-determined amount depending on the magnitude of the flood. As the policy provider, ARC Ltd.’s role will be to disburse these funds to the Lagos Ministry of Finance. Such payouts are often within days, allowing the government to deploy rapid emergency relief, direct cash transfers to affected households, and begin with infrastructure repairs. The InsuResilience Solutions Fund, funded by the KfW Development Bank on behalf of the German Federal Ministry for Economic Cooperation and Development, is providing the capital for the project, together with IDF insurance industry members.
CASE STUDY: MADAGASCAR
Four disaster climate events in two months Due to its geographical position, Madagascar is one of the African countries hardest hit by the impact of climate change. Cyclones batter the island nation up to four times a year. The beginning of 2022 saw Madagascar decimated by a series of extreme weather events. Tropical Storm Ana in January was rapidly followed by four events in February: Cyclone Batsirai, Tropical Storm Cliff around the same time, which was circulating, but thankfully did not make landfall, Tropical Storm Dumako and another, Cyclone Emnati. Sequence of events Ana made landfall on 22 January near the south-eastern city of Mananjary, 530km from the capital Antananarivo, leaving 55 people dead and displacing more than 70,000. Tropical Cyclone Batsirai, which made landfall on 5 February, was one of the worst cyclones to hit the country in 30 years. It left 121 people dead and more than 61,500 displaced – including 37,500 children – in central and southern Madagascar. Just 10 days later, Tropical Storm Dumako arrived, leaving another 14 people dead and displacing about 3,000. Cyclone Emnati arrived on the south-eastern side of Madagascar, where Batsirai had been just three weeks earlier. Thousands of people were evacuated, but luckily the cyclone did not cause any casualties or damage. Counting the cost The devastation of these cyclones and storms was immense. Over and above the many lives lost, the floods and winds destroyed buildings and infrastructure, and villages and towns were cut off – some were left without electricity or water supply. Many houses, because they are built of earth, were turned into mud during the flooding, often collapsing on people. Social services, such as schools and clinics, were severely damaged or destroyed. Coming to Madagascar’s aid Shortly after Tropical Cyclone Batsirai, ARC Ltd. made a payout of USD 10,7 million to enable the country to start rebuilding. Madagascar was the first African country to take up ARC Ltd.’s sovereign parametric cyclone insurance protection, which was launched in 2020. It took out a policy for a premium of USD 2 million, fully co-financed by KfW/BMZ Development Bank and ADRiFi multi-donor trust fund (MDTF), with an aggregate coverage limit of USD 11,7 million. Barriers to rebuilding Natural disasters, such as cyclones and drought, put the country continually on the back foot. This leaves its government unable to rebuild properly, depletes its coffers, causes food insecurity and exacerbates poverty. The southern part has been experiencing the worst drought in decades and its 30 million people are facing famine. Drought cover Madagascar had previously taken out ARC Ltd. drought insurance, 100% financed by the African Development Bank in 2019/2020. The country received a USD 2,13 million payout in July 2020 to cover anticipated losses to livelihoods due to crop failure in the previous season. A total of 600,000 affected people were helped, and bankruptcy among farmers was prevented. Early interventions of this parametric insurance include unconditional cash transfer and cash-for-work for 15,000 vulnerable households, nutritional support for 2,000 children under five years, and water supply for 84,000 households. Total ARC Ltd. payouts At the end of April 2022, ARC Ltd. had paid out USD 797,049 to Madagascar. The drought season is ongoing but on 10 April 2022 a guaranteed payout of USD 0,76 million to Madagascar was confirmed. Madagascar is an early adopter of parametric insurance, recognising that this coverage allows it to respond swiftly on the ground, save lives and have the means to rebuild.
CASE STUDY: MALI
The last 10 years in Mali have been characterised by conflict and political insecurity. The country has been rocked by three military coups during this time and human rights violations have increased at the hands of armed Islamist groups and Mali’s own security forces. The violence and conflict have led to 400,000 people being displaced, the highest in its recent history. More than half are women and 65% are younger than 18, according to Swiss NGO CARE, which works in Mali. It has called Mali “one of the world’s biggest forgotten crises”, where people have had to become used to a life of fear and uncertainty. Economic fallout The World Food Programme (WFP) estimates that as many as 78% of Malians are poor, the majority living in the highly populated areas of the south. Around three-fifths of the population are rural. The Covid-19 pandemic, coupled with the socio-political crisis and plummeting agricultural production, forced the economy into a recession in 2020. Drought and food insecurity Mali is an agricultural economy – both subsistence and commercial. Most of the working population is involved in subsistence farming but climate change has caused frequent drought and flooding. Cereal production has decreased, while the lack of pastures and water for livestock has forced some farmers to sell their animals and give up their livelihoods. Around 1,9 million people are at risk of severe food insecurity. Mainly in the regions of Kayes, Gao, Mopti, Segou and Timbuktu, malnutrition is evident and affects 30,4% of children under five, leading to stunted growth1 . Meanwhile, Mali’s population continues to grow rapidly (in 2018 the fertility rate was 5,88 children per woman, according to the World Bank). A climate insurance policy Since 2017, the WFP has supported a climate insurance policy for Mali to help fund an early emergency response to disaster. It also promotes resilience and provides financial protection to vulnerable populations when perils, such as Mali’s drought, occur. The ARC Replica programme complements and supports the efforts of the government in Mali to fight food insecurity and malnutrition. The government strategy is to provide half rations to populations in food crisis situations. However, the ARC Replica programme requires the government and partners, such as the WFP, to develop a contingency plan outlining how insurance payouts will be used. The payout benefits With the climate insurance payout, the WFP can provide early food assistance through cash transfers to 161,000 women, men and children affected by climate shocks. More than 20,000 children aged six to 23 months, and pregnant women and breastfeeding mothers, will receive nutritional support and services. To help boost communities’ resilience to climate shocks, 23,000 people will benefit from community programmes. These include the building of pastoral wells, water towers and fishponds to help diversify production and sources of livelihoods and reduce the impact of future droughts. For every USD 1 paid out, there is also a USD 2 impact on the economy. Total ARC Ltd. payouts In March 2022, drought-stricken Mali received its first-ever ARC Ltd. climate risk insurance payout totalling USD 7,1 million, paid over to the WFP. This means that more than 204,000 vulnerable people will benefit.
CASE STUDY: MAURITANIA
Crippled by compounded factors Mauritania, a lower-middle-income country in north-west Africa, is buckling under food insecurity. It is situated in the Sahel region – a semi-arid region of Africa bordered by the Sahara Desert – as are Burkina Faso, Chad, Mali and Niger. Mauritania has been grappling with the economic impact of Covid-19, displacement caused by extremist groups, and drought. Since September 2021, the country has also accepted more than 76,000 refugees, mainly Malians, who are being sheltered in the south-eastern region. The majority of the poor in Mauritania (74%) live in rural areas. Around 9,8% of Mauritania’s children suffer from malnutrition and, according to USAID, more than 660,000 people are expected to face crisis levels – or worse – of food insecurity during 2022. This is close to a 40% increase compared to 2021, and the highest level of food insecurity in Mauritania since 2012. An unprecedented humanitarian crisis is looming. Drought and environment Mauritania relies on agriculture to survive; with many smallholder farmers depending on seasonal workers, the bulk of whom are women. Last year Mauritania experienced below average and poorly distributed rainfall during what was supposed to be the rainy season. This resulted in below-average harvest and pasture production. The prolonged drought has seen a further destruction of harvests, livestock starving to death and a shortage of land for grazing. A knock-on effect of the drought has been soaring food prices. Compounding the hardship in the country are environmental issues such as desertification, deforestation, bush fires and ecosystems being degraded. Planning ahead The crisis in Mauritania underlines the importance of insurance instruments, which make funds and resources available for recovery efforts after a disaster. The government understands this, as well as the need to plan ahead and build resilience. To this end, it signed up for an ARC-Replica policy, through which it partners with the World Food Programme (WFP). This policy helps the Mauritanian government to boost its capacity to anticipate, prepare and respond to natural disasters caused by extreme weather events and extend its climate insurance coverage to reach more of its vulnerable citizens. ARC Ltd. payouts The low rainfall in June to November 2021 prompted a USD 1,14 million payout from ARC Ltd. to the WFP for the provision of food assistance in Mauritania. As a result, the country is able to rebuild and recover sooner, rather than later. This is not ARC Ltd.’s first payout to Mauritania for a drought-related crisis. More than USD 8 million in insurance payouts were disbursed previously to reduce the prevalence of food insecurity.
CASE STUDY: BURKINA FASO
A humanitarian crisis The West African country of Burkina Faso, with its population of 18,6 million, has been ravaged by violence and humanitarian atrocities since 2015, enacted by armed Islamist groups, state security forces in pushback efforts, and pro-government militias. This has left the country in abject poverty and food insecurity. According to UN refugee agency statistics, 1,447,026 people were displaced in September last year, with the World Food Programme (WFP) flagging Burkina Faso as one of the world’s fastest-growing displacement crises. Famine is looming and vulnerable families exceed two million. Malnutrition is rampant among children under five, as well as among pregnant or breastfeeding women Impact of climate change Climate change events have only added to Burkina Faso’s woes. Its geographical position means it has a dry tropical climate, with weather patterns alternating between a short rainy season and a long dry season. The country generally experiences low rainfall (in the north for only two months a year) and water retention of the soil is low. Climate change has been manifesting with high temperatures and a greater prevalence of drought. Drought conditions, which persisted from May to December last year, affected crops and cereal harvesting in December. Mitigating the impact Burkina Faso signed up for a parametric climate-change insurance contract in 2019 through an ARC Ltd. Replica policy. This partnership with the WFP ensures a proactive approach to disaster risk management. Covering weather related perils, it helps Burkina Faso determine its immediate requirements and coverage amount. Together with the government, we developed a contingency plan guiding how the payouts would be used. In the event of a natural disaster, the government is asked for a final implementation plan to ensure funds are received by the intended beneficiaries. This step also expedites disbursement. In collaboration with the WFP, Burkina Faso has benefited from other initiatives tackling hunger and malnutrition, and which are strategically aligned with similar government policies and rolled out in a coordinated way. They include resilience-building work with communities to futureproof them, as well as help them cope with current challenges; agricultural activities to help farmers protect their livelihoods and production; the development of community assets; improved market access; support for children’s schooling; and nutritional and school-feeding programmes to prevent malnutrition. ARC Ltd. payout The May 2021 to December 2021 drought triggered a payout of close to USD 1.2 million to the WFP, to combat hunger and malnutrition in Burkina Faso.