Ahead of COP27, the African Risk Capacity (ARC) outlines the importance of parametric insurance on the African continent, highlighting the need for further collaboration with more developed nations.
ARC provides parametric insurance services to African Union member states and farmer organisations to pool disaster-related risk across Africa and transfer it to international risk markets.
Since 2014, it has paid out $124,3m in claims from eight risk pools, transferred $1bn risk and covered 30m people per year.
In the past year, ARC paid out $59.6m and covered 18m individuals in countries like Mali, Malawi and Madagascar, and expects the impact will be even greater in 2022.
These high levels of pay outs illustrate the value of a parametric insurance mechanism to meet the needs of Africa’s most vulnerable, ARC notes.
It adds that insurance products help to build resilience by supporting the implementation of national disaster risk management policies and strategies, particularly the promotion of financial resilience to climatic hazards.
Lesley Ndlovu, ARC CEO, commented, “As the premier institution for disaster risk financing on the continent, ARC provides disaster risk insurance targeted at promoting resilience and providing financial protection to vulnerable populations in Africa when perils occur.”
“The pay outs assist governments in supporting their affected populations quickly, helping them rebuild and recover from the effects of a drought or tropical cyclone and ensuring they have the means to bounce back swiftly instead of resorting to negative coping mechanisms.”
Hans Ramm, former Senior Policy Advisor for the Swiss Agency for Development and Cooperation added that the ARC risk transfer and risk pool solution is the only affordable disaster-risk system on the African continent.
As of now, only 13 African countries participate in ARC’s risk pools.
In turn, ARC insists that there’s much more work to do to achieve the organisation’s vision of extending climate risk financing to cover the estimated 200m vulnerable people who bear the brunt of climate change impacts on the continent.
“We need broader collaborations between private and public sector if we are to reach even more people and close the protection gap,”
“As we prepare for COP27, key discussion points must be how these partnerships can build a resilient continent able to respond to extreme weather events and, in doing so, protect the economic development gains made over the last few years. The problem is so big that all of us have a role to play,” Ndlovu concludes.