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ARC Group and African Bank provide drought insurance payout to Zambian Government

17th June 2022 - Author: Kassandra Jimenez-Sanchez

A symbolic $5.3m cheque has been presented to the Zambian Government as payout for the drought insurance taken under the Africa Disaster Risk Financing Programme Multi-Donor Trust Fund.

DroughtThe fund is supported by the Governments of the United Kingdom, through the Foreign, Commonwealth and Development Office, and Switzerland, through the Swiss Agency for Development and Corporation, and managed by the African Development Bank(AfDB).

Presented by representatives from the African Risk Capacity Group (ARC) and the African Development Bank, the parametric insurance payout will aid in the country’s recovery from the extreme drought event during the 2021/2022 agriculture season.

This will enable the timely emergency response activities in communities affected by drought, through the provision of cash transfers and food assistance to ensure food is available for the targeted households during the lean season period, according to an announcement.

The adverse impacts of climate change and climate variability caused droughts in Zambia in 2021 and 2022. Substantial lack of rain impacting crop production resulted in severe food insecurity in districts in the southern and western parts of the country.

Stratumn, by SIA Partners

The Government of Zambia had earlier signed a memorandum of understanding with the ARC to participate in the 2021/2022 drought risk pool to better deal with the drought and protect vulnerable populations from its adverse impacts.

The Zambian Government made a premium budgetary allocation from its national budget and sought additional premium financing support from the Swiss Agency for Development and Corporation and the AfDB to maintain the insurance policy for the 2021/22 agriculture season.

“ARC offers an African solution to one of the continent’s most pressing challenges, the shocks of climate change, transferring the burden of climate risks away from governments to ARC through sovereign insurance,” said Dr Abdoulie Janneh, ARC Group Deputy Board Chair and ARC Ltd Board Chair.

“The Government of Zambia is our privileged partner, and we stand with them to ensure their vulnerable population and livelihoods are protected against extreme weather-related disasters,” he added.

AfDB Vice President for Agriculture, Human and Social Development, Dr. Beth Dunford commented: “The African Development Bank is pleased to see this African Risk Capacity Group payout to the Government of Zambia. We expect this to be the beginning of continued support to help the country enhance their resilience to the shocks of climate change.

“The Bank’s support has brought assistance to farming communities hit hard by drought and poor crop yields, by enabling Zambian authorities to provide them with cash payments and sustaining them from eating their seeds as food, quitting farming as livelihoods, or migrating in search of food and non-existent jobs.”

Zambia’s Acting President, Her Honour W.K Mutale Nalumango, welcomed the payout from ARC to the Republic of Zambia. She said: “With the national treasury experiencing unlimited demand for the provision of public goods and services, the government stands ready to support disaster risk transfer initiatives that lighten the burden on the government.

“I urge other organisations such as the World Food Programme and other international and local civil societies to come on board to help expand the ARC insurance coverage in Zambia by partnering with my government to take up replica and micro insurance.”

The funds disbursed to the Government of Zambia will also boost the local economy and help communities build back better.

ARC’s previous parametric insurance payouts include $14m to the Malawian government in early June, and $10.7m to Madagascar in February.

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