INNOVATIVE INSURANCE COVER TO HELP DROUGHT-HIT COMMUNITIES IN AFRICA
August 7, 2019
ROME-LONDON – Humanitarian agencies are setting up innovative climate risk insurance policies to protect up to 1.3 million people in West Africa from catastrophic drought. The countries benefitting include Senegal, Mali, Mauritania, Burkina Faso and the Gambia.
These policies will unleash funds to assist vulnerable communities threatened by drought before it reaches catastrophic levels. Collectively, the purchased policies could release a total of US$ 49.5 million across the five countries. The World Food Programme (WFP) and the Start Network have purchased these “replica” climate risk insurance policies from the African Union’s Africa Risk Capacity (ARC), complementing those purchased by national governments.
This initiative, which is known under the name ‘ARC Replica’ allows governments and humanitarian agencies to quickly access and channel financing to vulnerable people in the event of an extreme drought.
“ARC Replica is strengthening the insurance coverage offered by ARC by increasing the sum insured for Mali,” explains WFP Country Director, Silvia Caruso. “This increases the number of people that will benefit from a payout in the case of a major drought.”
This financing helps to protect livestock and other assets, and to supplement feeding programs for undernourished children. To ensure assistance reaches people in need quickly, Start Network and WFP have worked with each insured country to identify how resources and assistance can most efficiently be delivered.
“Many developing countries face the risk of disasters without being sufficiently prepared for them. When a disaster strikes, humanitarian organisations often respond too late, leaving affected populations vulnerable to further risk,” says KfW Development Bank project manager, Veronika Bertram-Hümmer. “We are very pleased to finance ARC Replica and work with the Start Network and the WFP to improve national preparedness and risk management efforts which ultimately allow us to help people affected by drought in West Africa and the Sahel.”
Through ARC Replica, the Start Network and WFP accompany governments in improving risk management practices, working collaboratively to strengthen safety nets and climate protection to vulnerable populations.
Mr. Abdoulaye Noba, Director of Civil Protection, Supervisor of the ARC Programme in Senegal, says that “ARC Replica is an innovative project that enables ARC Member States and humanitarian partners to respond more effectively to disaster risks through funding mechanisms such as insurance.”
ARC and ARC Replica use pre-agreed triggers such as rainfall satellite data which allow for rapid response involving pre-agreed activities such as cash transfers and the distribution of food and nutrition supplements. The aim is to avoid situations where families take children out of school, migrate or sell livestock and seeds before the next agricultural season.
“We will keep working closely with the Government of Senegal, Start Network members in country and their partners to ensure that if a drought is detected, funds become available promptly to deliver support to vulnerable people,” says Anna Farina, Risk Financing Operations Lead at Start.
Pay-outs are made as early as two weeks after a failed harvest – months earlier than traditional humanitarian resources are made available. Typically, aid agencies are reliant on funding that gets provided by donors after a crisis has already taken place. By the time a crisis has been determined and humanitarian appeals have been formulated, many lives and livelihoods can be lost.
*WFP News feed
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ARC and ARC Replica
The African Risk Capacity (ARC) is an institution set up by the African Union to strengthen African countries’ management of climate risk. This is achieved by offering governments drought insurance policies in exchange for an annual premium. ARC Replica is an insurance product offered by ARC Ltd to humanitarian organizations as an innovative approach to expand climate risk insurance coverage to more people and improve the effectiveness of emergency humanitarian response in vulnerable African countries prone to climate risks.
ARC Replica in Mali, the Gambia, Burkina Faso and Mauritania is led by the United Nations World Food Programme (WFP). Saving lives in emergencies and changing lives for millions through sustainable development. WFP works in more than 80 countries around the world, feeding people caught in conflict and disasters, and laying the foundations for a better future. For WFP, ARC Replica fits into a wider risk financing portfolio with forecast-based financing and microinsurance programmes, such as the R4 Rural Resilience Initiative.
The Start Network is the Replica partner in Senegal and it will sign a policy later this year in Madagascar. The Start Network aims to generate evidence from the ARC Replica initiative to inform the development of a ‘family’ of global financing mechanisms for frontline humanitarian responders, set to include a financial tool-box of products such as contingency funds, forecast-based-financing, and loans in addition to macro- and micro- insurance.
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