The African Risk Capacity Group and the Government of Djibouti have signed the first-ever multi-year, multi-peril agreement on the African continent to protect the most climate-vulnerable communities.
The agreement means that Djibouti now has access to five years of disaster risk management capacity building and disaster risk insurance coverage offered by the ARC Group.
The agreement covers two of the country’s most prevalent hazards – drought and excess precipitation.
Ibrahima Cheikh Diong, UN-Assistant Secretary General and Director General of the ARC Group commented, “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 $2 million to underwrite the insurance policy.
Boubacar-Sid Barry, World Bank Resident Representative in Djibouti, said, “This is a first for Djibouti and underscores the World Bank’s commitment to supporting efforts that help communities to become more resilient and to adapt to climate change through the use of innovative financial instruments, including insurance.”
Meanwhile, 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.
Descartes utilises advanced data and machine-learning techniques to model underlying phenomena and unlock risk insights that align with the realities of a shifting climate and risk landscape.
Tanguy Touffut, CEO of Descartes Underwriting, commented, “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 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.
The goal of the insurance cover for drought was to cover the pastoral population, who are the most vulnerable to drought. These are mainly nomadic herders living in rural areas, who move according to the rainfall and the availability of fodder.
Rougier says they 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.
The country is also affected by extreme precipitation events that can cause devastating flash floods with significant human and economic losses.
According to Girelli, “The focus of the excess precipitation part of the insurance coverage is on Djibouti-City, which comprises approximately 60% of the population. The people living here are particularly vulnerable to extreme rainfall due to population density, the topography of the city, and its coastal location.
“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.
“Their role is to revolutionize insurance in the face of climate change and provide cover to those most vulnerable to its impact. This is a space where they want to continue contributing.”
Executive Secretary for Risks and Disasters Ahmed Mohamed Madar notes that while Djibouti was an original signatory of ARC’s treaty in 2012, 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.
ARC CEO Lesley Ndlovu concluded, “Not only is this multi-year, multi-peril agreement groundbreaking 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.”
