In light of the ongoing COVID-19 pandemic, the German government has committed to assume premium payments of approximately €19 million for the drought insurance offered by the African Risk Capacity (ARC).
In a recent video message, Maria Flachsbarth, Parliamentary State Secretary at the German Federal Ministry for Economic Cooperation and Development (BNZ) and Co-Chair of the InsuResilience Global Partnership, stressed that Germany will provide its partners in Africa with assistance in light of the broad social, economic, and financial challenges from COVID-19.
The African Risk Capacity (ARC) has been providing drought insurance protection, structured as a parametric contract, to African states since its launch.
Purchasing an ARC insurance policy provides member states with valuable protection against the negative effects of a drought. However, and as noted by ARC, it can be a challenge for member states to finance annual insurance premiums, an issue that has become more acute during the current crisis.
In response, the German government has responded with its emergency COVID-19 support programme. Under the arrangement, Zimbabwe and five West African countries, which are due to renew their cover in June, will be provided with €8.5 million for premium payments under ARC Replica.
As a result, the World Food Programme and the START Network will be able to take out ARC parametric insurance policies for Burkina Faso, The Gambia, Mali, Mauritania, Senegal, and Zimbabwe.
In addition, the BMZ is to provide a further €10.5 million for premium subsidies to countries in the south and east of Africa, where the insurance protection will not be taken out until H2 2020 owing to the later planting season.
“Firstly, we are deliberately creating liquidity for our partners’ particularly urgent COVID-19 measures. Secondly, we are ensuring that the drought insurance, which is of vital importance to so many people, is not lost in the already difficult situation. And thirdly, we are contributing towards stability for ARC member countries,” said Flachsbarth.
Ngozi Okonjo-Iweala, Chairperson of the ARC Governing Board, has said that Germany’s assistance will “help avert a situation of compounded effect of the Coronavirus pandemic and drought in any of the beneficiary countries thereby saving the continent from extended negative health and socioeconomic problems.”
