Ghana purchases its first drought insurance policy from ARC 

Johannesburg, Frankfurt, Bonn, October 17 2024 – The Government of Ghana has purchased its first-ever sovereign drought insurance policy, taking a significant step towards safeguarding its vulnerable communities and agricultural sector from potential drought. Through an inclusive, country-led process coordinated by the Global Shield Secretariat, the African Risk Capacity (ARC) Ltd. issued the policy for the benefit of the Government of Ghana, financed with US$1 million by KfW Development Bank on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the Global Shield Solutions Platform (GSSP), managed by Frankfurt School of Finance & Management. This collaboration underscores the government’s commitment to building resilience in agriculture and protecting livelihoods in the face of climate-related risks.  The Government of Ghana has taken proactive steps to better protect its agricultural sector against the risk of drought. The policy, designed to provide financial relief in the event of a drought, will enable the government to respond quickly and efficiently to support affected farmers and communities. Funds from the insurance payout will be directed towards safeguarding food security and stabilizing the agricultural sector.  Ghana’s investment in the financial resilience of vulnerable livelihoods marks the culmination of a truly collaborative process, set in place by the Global Shield against Climate Risks Initiative. The convening of relevant stakeholders, and a tailor-made, demand-driven and inclusive approach to identify key climate risks and viable pre-arranged finance mechanisms paved the way for this first drought insurance policy.  Ghana’s proactive approach, in collaboration with ARC, sets a strong example for other African nations facing similar climate-related challenges. As the continent confronts the realities of climate change, risk transfer mechanisms, such as drought insurance, will play a crucial role in protecting lives, securing livelihoods, and strengthening climate resilience across Africa.  “The Government of Ghana has shown foresight and initiative by implementing this first-ever drought policy,” says Malvern Chirume, Chief Underwriting Officer, ARC Ltd. “Within the context of climate change where drought events will increase in frequency and severity, the country is now protected against a potential crisis.” Furthermore, Chirume emphasises that the policy extends beyond financial protection: “It ensures that vulnerable communities in Ghana can continue to thrive despite increasingly erratic weather patterns due to the early warning tools available to the government. This policy is also a key component of our broader efforts to enhance climate resilience across Africa.”  “We are delighted to see the implementation of the Global Shield process come to fruition in Ghana, through multi-stakeholder, collective action, marking the completion of the first in-country process. We know that disasters don’t wait to happen – they strike with little warning, so the importance of pre-arranged finance mechanisms cannot be stressed enough. With the ARC policy in place, we are assuring the resilience of vulnerable livelihoods amid the ever-growing threats posed by climate change”, says Nilesh Prakash, Co-Director of the Global Shield Secretariat.  “The GSSP is very pleased to financially support the purchase of ARC drought insurance by the Government of Ghana for the benefit of vulnerable populations”, says Karsten Löffler, Co-Head of GSSP. “It is a good example of what pooling funds for pre-agreed risk financing solutions and international coordination can achieve.”  “KfW Development Bank is very happy that Ghana is becoming an active member of the ARC family”, states Malte Marek, Senior Portfolio Manager at KfW. “Being the second largest economy in western Africa, Ghana can set the scene for other countries joining ARC in the future.”    “Ghana’s participation in the ARC risk pool is evidence of the proactive approach that the government is taking to protect the lives and livelihoods of the population that relies on agriculture as a source of livelihoods” according to Charlotte Norman, Government Coordinator for the ARC Programme. “This protection is one of many initiatives that the Government of Ghana is taking to boost its capacity to respond to various climatic shocks that affect its population”. 

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.