The Insurance Development Forum (IDF), alongside its partners, has successfully delivered two parametric insurance products to help strengthen the financial resilience of flood-prone communities in Ghana.
In response to the increasing flood risk and limited financial protection a new project was launched in 2022 to enhance the financial resilience of flood-prone communities in Ghana, under the framework of the Tripartite Agreement.
Led by the Ghana Ministry of Finance, National Disaster Management Organisation, National Insurance Commission, the United Nations Development Programme (UNDP), and the Insurance Development Forum (IDF), the project aimed to strengthen local disaster risk management.
The project was financially supported by the InsuResilience Solutions Fund (ISF) and implemented by KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).
Following a two-year development period, the consortium consisting of Allianz, Swiss Re, and HKV successfully launched two parametric insurance products: the Excess Rainfall Cover and the Flood Footprint Product.
Parametric insurance offers a different approach to flood protection than traditional insurance. Instead of waiting for damage assessments, it provides rapid payouts based on predetermined factors like rainfall or flood levels.
This helps communities in the Greater Accra Metropolitan Area (GAMA), particularly vulnerable households in low-income and informal settlements, recover faster after floods.
These areas were specifically chosen for the program to cover vulnerable households in low-income and informal settlements in the area, the firm stated.
Working closely with the National Disaster Management Organization (NADMO), the UNDP and other government stakeholders drafted a Flood Contingency Plan with technical support and input provided by the Insurance Development Forum industry.
The Plan prioritises the deployment of funds from the payout for food relief, emergency shelter and non-food relief items, logistics services, environmental sanitation and hygiene promotion, restoration of livelihoods, restoration of teaching and learning materials, and restoration of critical infrastructure.
Alongside the development of the risk financing solution, UNDP has trained around 40 professionals in risk financing, collaborated with the Ghana Insurance College to certify insurance professionals, and boosted public awareness about inclusive insurance.
The Tripartite partners, the firm stated, are committed to continuous learning and improvement, with plans in place for further training and capacity-building initiatives in the months to come.
Dr. Stephen Amoah, Deputy Minister of Finance, said: “This collaboration with UNDP, IDF and BMZ is a testament to Ghana’s commitment to innovative solutions that address climate and disaster risks.
“The handover of these insurance solutions is a major achievement for our national disaster risk reduction efforts and the Government of Ghana is working on ensuring that the product goes live so as to benefit vulnerable Ghanaians living in the GAMA region.”
The risk-transfer solutions are now fully developed, and stakeholders welcome the opportunity for the government of Ghana to apply for premium financing from the InsuResilience Solutions Fund.
This financing would enable the product to enter the market and provide protection for vulnerable households and businesses facing persistent flood risks and their associated impacts. The government of Ghana is currently evaluating this offer.
Dorien Lugt, Consultant Water and Climate, Partner at HKV, on behalf of the Insurance Development Forum Industry Consortium partners HKV, Allianz and Swiss Re, said: “In Africa, flooding affects more people than any other natural risk, but it remains a complex risk to model and insure.
“This flood insurance is based on observed flood extents by a new generation of satellites instead of observed rain, thus relating more directly to the situation on the ground. If the government now decides to implement this solution, then Ghana will be the first country in the world to deploy this new type of flood insurance.”
