African Risk Capacity (ARC) Limited: African countries receive nearly US$60 million to rebuild after natural disasters
Africa is fighting challenges on many fronts – conflict, poverty, hunger, and climate change. The frequency and severity of these challenges is only expected to increase in the next few years.
Since 2014, African Risk Capacity (ARC) Limited as the financial affiliation of ARC Group, has been providing risk transfer solutions in the form of parametric insurance to assist countries in building resilience and mitigating the risk of natural disasters. ARC works with governments and aid agencies, and claims are paid out following a natural disaster, providing immediate funding for relief operations. The insurance policy taken by the aid agencies (called Replica Partners), complements the policy taken by the country and helps close the “protection gap”.
In the past year alone, four African countries have benefited from almost $60 million in payouts.
Malawi’s cluster approach
In June 2022, Malawi was paid out US$14.2 million. The funds were disbursed to ARC Ltd. Replica partner, the World Food Programme (WFP) for food assistance. ARC insurance is highly customisable. In 2021, ARC worked with the government to create four clusters based on the agro-ecological zones and a different insurance policy was issued for each.
The multi-faceted crisis in Mali
As an agricultural economy, Mali has been crippled by a recent drought and it is estimated that 1.9 million people are at risk of severe food insecurity. The situation is exacerbated by the ongoing conflict in the country. In March 2022, Mali received its first-ever payout, totalling US$7.1 million, disbursed to the WFP. This meant that more than 204 000 vulnerable people had access to relief.
Madagascar’s difficult start to 2022
Madagascar is one of the African countries hardest hit by the impact of climate change, due to its geographical position. Tropical cyclone Batsirai hit the country earlier this year and was the worst in three decades, leaving 121 people dead, and more than 61,500 displaced. Madagascar was the first African country to take up ARC LTD’s sovereign parametric cyclone insurance protection, launched in 2020.
Zambia to increase coverage
After prolonged dry spells in the 2021/2022 season, Zambia received its first-ever drought payout worth US$5.3 million in June 2022 to provide the government with food assistance. Provision of cash transfers was made to vulnerable households during the lean season. Only five out of 10 provinces were covered by drought insurance but the government is now looking to adopt the cluster approach.
With more participants, insurance products can become more cost-effective, but the challenge remains to bring more African countries on board for the greater good of all.