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ARC addresses role of insurance on climate change impacts in Africa

10th August 2022 - Author: Kane Wells

The African Risk Capacity Insurance Company (ARC) has hosted a regional meeting to address the role of insurance in fighting climate change impacts on the African continent.

African Risk Capacity logoRepresentatives from ARC member states and funding donor partners met in Malawi to discuss how parametric insurance has the potential to transform how the continent deals with climate-change-induced events such as droughts and cyclones.

ARC has made a record payout of almost $60 million in claims this year, protecting Africa’s most vulnerable against the worst impacts of extreme weather.

A significant $797,049 cheque was issued by ARC and the African Development Bank to the Government of Madagascar earlier this year as an insurance payout after delayed rains caused draught during the 2021-2022 agricultural season.

The meeting brought together key stakeholders in the ARC ecosystem to address the challenges and opportunities of working together to fight the impact of climate change.

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Addressing delegates, ARC Limited CEO, Lesley Ndlovu, commented on the value of ARC on the African continent.

“In the history of ARC, we have paid about US$125 million in claims and half of that was in last year’s Pool 8. We are extremely happy when we pay claims because these go towards meeting the needs of Africa’s most vulnerable people. These payouts also demonstrate the value of the insurance mechanism.”

“Further, the fact that about half of the claims paid were paid by the insurance
market means that ARC is able to take weather-related risks on the African continent and seed them into global markets such that when there’s a disaster on the African continent, part of the payment for the cost of that disaster also comes from the global reinsurance markets, again demonstrating the value of having a mechanism like ARC.”

During the session, representatives from Malawi, Mali, Madagascar and Zambia, all shared their insights on how the ARC insurance mechanism had supported their risk management programmes in the last year.

In the meeting, ARC also expanded on the intention to increase coverage in wider countries.

The overreaching goal, Ndlovu shared with delegates, was to increase the participation of African countries in its insurance programme and position ARC as Africa’s premier institution for disaster risk financing.

“Currently, we have 13 countries that participate out of 55 on the African continent. We need more to participate, and are also working very hard to bring partners into the ecosystem so we are able to overcome the two main barriers we face in the growth of insurance – the affordability of premiums and increasing capacity building so there is greater understanding of the role of insurance in disaster risk management.”

Ndlovu concluded the event by saying, “We all know that Africa is a continent that is most exposed to climate-change-related risks and with ARC we have in our hands an instrument that can play a vital role in creating the solution to protect the most vulnerable African citizens against the worst impacts of extreme weather. It really is up to us to make this initiative a success.”

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