The Lagos State government has contracted a parametric flood-risk insurance policy in the Nigerian insurance market, designed to protect up to 4 million vulnerable people, providing up to USD 7.5 million for flood response and recovery.
The policy’s activation represents a crucial achievement for the Tripartite Agreement Programme, which aims to build developing countries’ resilience to climate risk.
The Programme is a public-private partnership between the Insurance Development Forum (IDF), the United Nations Development Programme (UNDP), and the German Federal Ministry for Economic Cooperation and Development (BMZ) through the InsuResilience Solutions Fund (ISF).
The policy is now live, enabling the local Government to quickly access funds to support emergency response efforts.
This includes disaster relief and direct cash transfers to affected communities in seven local government areas covered by the policy, as has been outlined in the Lagos Flood Contingency Plan which was developed with the support of UNDP and the African Risk Capacity.
Climate change is intensifying floods in Lagos, a coastal megacity with a population exceeding 22 million. Rapid urbanisation exacerbates these impacts, which disproportionately affect the 80% of the population who are low-income, with insurance coverage below 0.5%.
The Tripartite Agreement Programme’s Nigeria project, led by the Government of Lagos State, was launched in 2022 to unlock financial resources for communities to prepare for and recover from climate-impacts.
His Excellency, the Governor of Lagos State, Babajide Olusola Sanwo-Olu said: “Climate inaction could cost Lagos State just under USD 40 billion by 2050, with severe consequences for our people, infrastructure and economy. Our wetlands and biodiversity are also under threat.
“These realities demand urgent action. This pioneering parametric flood insurance policy strengthens our ability to protect lives, livelihoods and public finances while embedding climate risk management into Lagos State’s long-term development planning.”
The parametric flood-risk product is a collaborative effort between the Lagos State Government and a group of IDF member insurance organisations.
This team includes AXA Climate, the Nigerian company AXA Mansard, Swiss Re, ICEYE (a satellite company), flood modeler JBA Risk Management, and African Risk Capacity Ltd.
ISF co-funded this work alongside the IDF insurance industry members, with UNDP Nigeria support and UNDP’s Insurance and Risk Finance Facility.
Partners in Nigeria include the Lagos State Government Office of Sustainable Development Goals (OSDG), the Lagos State Ministry of Finance, Lagos State Ministry of Budget and Economic Planning and the Lagos State Emergency Management Agency (LASEMA).
Karina Whalley, Head of Public Sector, AXA Climate and IDF Lagos Project Co-Lead, commented: “This policy demonstrates the power of insurance to enable preparedness ahead of and faster recovery after disasters, as well as greater financial resilience for governments; in short, future-ready nations.
“The product design harnessed our industry members’ technical expertise in flood risk modelling and parametric insurance to develop a scalable solution tailored to the needs of climate-vulnerable communities in Lagos.”
The insurance product was delivered by the IDF team and received regulatory approval earlier this year. The ISF financed 90% of the first years’ premium to enable placement.
Moreover, the Lagos State government stated its commitment to increasing their premium finance allocation beyond 10% in the second and third year of the policy, to ensure the sustainability of the protection provided by the product.
