The African Risk Capacity Insurance Company Limited (ARC Ltd) has paid US $2.13 million to the Government of Madagascar to cover anticipated losses to livelihood after crop failure in the last farming season.
The ARC payout is the result of drought insurance taken by the country with the support of the African Development Bank (the Bank) through its Africa Disaster Risk Financing (ADRiFi) Programme.
Madagascar will use the funds to assist the lives and livelihoods of 600,000 vulnerable population affected by the drought.
“The drought insurance of African Risk Capacity is one of the sustainable solutions to strengthen the efforts of the Government and partners in the Southern region of Madagascar,” said the Minister of Economy and Finance, Richard Randriamandrato.
“It demonstrates the mutual assistance between friendly African countries to respond efficiently to natural disasters, particularly drought,” he added.
Madagascar faces disaster risks from an increasingly variable and changing climate, which add to the challenges of widespread food insecurity.
Due to its geographical position, the country is vulnerable to various climate shocks, with cyclones, floods and droughts regularly adding pressure to the country’s public finances and GDP growth.
According to African Development Bank, natural disasters in Madagascar in 2017 caused an estimated $420 million in related damages.
“The payout made by ARC to support the drought-affected population in the Great South region was made possible thanks to the leadership and commitment of the Government of Madagascar to protect its people,” Mohamed Beavogui, the Director-General of African Risk Capacity.
“We also thank the AfDB for their laudable support through the ADRiFi programme,” Beavogui went on. “This is a vivid testimony that collaboration between African governments and development partners, both within and outside the region, using market approaches can go a long way in saving developmental gains on the continent.”
Lesley Ndlovu, the CEO of ARC Insurance Limited, also commented: “Our purpose in working with Member States to provide disaster risk insurance is targeted at promoting resilience and providing financial protection to the vulnerable population when perils occur.”
“We are glad that this payout will assist the Government in quickly supporting its affected population to rebuild and recover from the effects of the drought and prevent them from resorting to negative coping mechanisms.”
Jennifer Blanke, Vice President for Agriculture, Human and Social Development at African Development Bank, further stated: “The insurance policy payout is timely, with Madagascar also facing the challenges of dealing with the current COVID-19 pandemic. It demonstrates that risk transfer programmes can help countries manage the risks of climate-related disaster and release pressure on public finances when multiple crises occur.”
