Dolika Banda, Chief Executive Officer (CEO) of the African Risk Capacity Insurance Company Ltd. (ARC Ltd), the insurance mutual of the African Risk Capacity (ARC), has called for a more proactive response across Africa in the face of climate and weather related catastrophes, reports The Nigerian Voice.
ARC, Africa’s sovereign parametric catastrophe insurance pool, was established in 2012 and enables the use of valuable insurance protection against adverse weather events for its member African countries, utilising a parametric trigger structure that ensures rapid-payout post-event.
The facility has already paid out on more than one occasion to member states following catastrophe events, with more perils expected to be added to its coverage list and more African countries expected to become member states in the months and years ahead. So it’s clear that the ARC initiative has been successful in its goals, which are made possible by its use of reinsurance protection from a range of global reinsurers.
The Nigerian Voice reports that Dr. Simon Young, former CEO of ARC Ltd., explained that ARC’s portfolio is backed by 24 reinsurers, up from the 12 that signed on when it launched in 2014.
Young explained that the reinsurers, which includes Munich Re, “needed us more than we needed them,” highlighting how ARC “is a really nice vehicle for them to get a lot of risk in a nicely packaged way,” in a market that’s difficult to enter.
Appetite among the risk transfer industry for participating in the scheme remains strong, and the leverage enables ARC to negotiate favourable pricing and terms, explains the report.
But despite the benefits insurance and reinsurance protection is bringing to ARC’s member countries, current ARC Ltd. CEO, Dolika Banda, has urged for a more proactive response to disaster risk management across the continent.
“The continent needs to move from an ex post humanitarian response to ex ante preparation and disaster management plans,” says Banda.
Ex ante refers to forecasts rather than response, so a focus on improving disaster resilience as opposed to waiting for a disaster to strike, and then paying for the rebuilding. Clearly, schemes like ARC that use re/insurance protection are important in places like Africa where the impacts of catastrophes can be truly devastating to the livelihoods of many.
However, to limit the need for re/insurance protection Banda underlines that the real goal is to transition “away from disaster response and shift the conversation to one that is more proactive.”
ARC does promote disaster preparedness, with member countries tasked with the development of contingency plans before they can purchase protection through the scheme.
