Representatives from African governments, humanitarian partners and donors have met in Malawi to discuss how parametric insurance delivered through African Risk Capacity Limited (ARC) has the potential to transform how the continent deals with extreme weather events, such as droughts and cyclones.
The ARC said they had made a record pay-out of almost $60m in claims as a result of extreme weather this year, highlighting the importance of the meeting.
During the session, Malawi, Mali, Madagascar and Zambia shared their insights on how the ARC Limited insurance mechanism had supported their disaster risk management programmes in the past year, as well as lessons learnt, including the need for political buy-in and alternative pay-out mechanisms.
Lesley Ndlovu, ARC Limited CEO, said, “In the history of ARC, we have paid about $125m in claims and half of that was in last year’s Pool 8. We are extremely happy when we pay claims because these go towards meeting the needs of Africa’s most vulnerable people. These pay-outs also demonstrate the value of the insurance mechanism.
He added that the fact that about half of the claims paid were paid by the insurance market means that ARC is able to take weather-related risks on the African continent and seed them into global markets, “such that when there’s a disaster on the African continent, part of the payment for the cost of that disaster also comes from the global reinsurance markets, again demonstrating the value of having a mechanism like ARC.”
Beyond the assistance to African governments, Ndlovu also highlighted ARC’s work in diversifying its products, including the development of flood and pandemic insurance.
In addition, an essential part of how ARC Limited intends to expand coverage to the countries with which it works is micro and meso insurance products. Several pilots have also been developed to this end in countries such as Côte d’Ivoire, Zimbabwe, Madagascar and Burkina Faso, among others.
Ndlovu concluded by calling for more African countries to participate, currently 13 out of 55 are. He also added that ARC can play a “vital role” in creating the solution to protect the most vulnerable African citizens against the climate change-related risks that the African continent is so harshly exposed to.
The growing frequency of extreme weather events, particular in already vulnerable societies, has prompted the insurance industry to look at how they can better protect policyholders in these areas.
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