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. 

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.