The African Risk Capacity (ARC) Group has launched a parametric insurance product aimed to help African countries cope with the devastating effects of flooding.
This mechanism will provide countries with predictable and rapid financing for early response to cope with emergency disaster events caused by floods.
ARC partnered with JBA Risk Management to develop a model to support the delivery of a practical and customisable parametric flood insurance product, the organisation explained.
The Flood product will generate daily flood analysis and calculate the associated impacts for each country. These impacts are compared to the parametric triggers (economic losses or the number of people affected), and payouts are calculated if flood impacts exceed the trigger threshold defined by the country.
According to the announcement, the launch of this product is a significant milestone in building resilience to climate-related disasters on the continent as it is the first flood risk insurance product in Africa.
Ibrahima Cheikh Diong, ARC Group Director-General stated: ARC’s goal is to continue to diversify its products offering to meet the needs of Member States effectively. This new Flood insurance product will allow Member States to better anticipate and manage extreme flood events while ensuring that their impact on the population is mitigated.”
The number of flood events in Africa have increased significantly, including in many major urban centres and coastal areas. These have resulted in numerous deaths and the displacement of millions of people and caused significant damage to property and farmlands worth billions of US Dollars.
Additionally, climate change has made the occurrence of floods in ARC Member States more frequent and increased in intensity in recent decades, the organisation explained.
Adding: “Member States have expressed a strong interest in the development and delivery of a flood insurance product to help countries respond timely to flood disasters. Although some regional and national flood early warning initiatives exist, there is no operational system going up to estimate economic losses to underpin a sovereign insurance scheme.”
Following in-countries validation workshops and quality review processes the ARC Flood Risk Model was deemed ready and robust enough and can now be confidently used for underwriting insurance policies.
The Flood model is available for Madagascar, Mozambique, Malawi, Cote d’Ivoire, Ghana, and Togo, and will be extended to other countries in 2024.
