ARC to double insurance coverage
African Risk Capacity (ARC), Africa’s first sovereign catastrophe insurance pool, has unveiled plans to double its insurance coverage through a new replica coverage initiative.
ARC said the initiative will allow international organisations, such as United Nations (UN) agencies, and non-governmental organisations (NGOs) to take out policies that match those already provided directly to African governments, expanding each country’s coverage.
ARC is also a key player in the Anticipate, Absorb, Reshape initiative, or A2R, which is a global, UN-led, multi-stakeholder initiative that seeks to accelerate action on the ground to enhance climate resilience of the most vulnerable by 2020.
The drought in the Sahel in 2015 triggered $26 million in payouts by its financial affiliate, ARC Ltd to Mauritania, Niger and Senegal. The countries paid a combined premium of $8 million.
Payouts were used to deliver livestock fodder, food and cash to affected populations based on pre-approved contingency plans, according to the firm.
By 2020, ARC, which received returnable ‘development capital’ contributions from the UK and German governments, aims to increase direct sovereign coverage from $180 million in 2015 to $850 million by 2020 as more countries join and its offering expands from drought to include floods and tropical cyclones.
Replica coverage could double this limit to over $1.5 billion by 2020, insuring up to 30 countries, representing more than 150 million Africans, according to the organisation.
“The success of ARC demonstrates that African states are willing to allocate more domestic resources to disaster funding,” said ARC.
“However, many of these states will continue to need international support and significant funding through the UN appeals process, until they can fully manage their own risk.
“At a time when the humanitarian funding gap continues to widen, insurance schemes like ARC offer real solutions for better allocating international resources in a cost effective way. ARC is working closely with the United Nations World Food Programme’s (WFP) Food Security Climate Resilience Facility (FoodSECuRE) to develop this initiative.”
Ertharin Cousin, executive director of the WTP, added: “The humanitarian sector recognises the necessity for much more proactive disaster funding.
“WFP is working internally to develop new financing mechanisms while also collaborating with partners including the ARC to harness additional innovative early financing capabilities that will increase our ability to support government-led responses.”
ARC said that international organisations and NGOs participating in the replica product would act alongside the governments in building sovereign capacity to respond to natural disasters and would also have to have their contingency plans approved by the relevant government as part of its broader plan submitted to ARC.
"Through this arrangement, ARC provides an innovative, cost-effective and reliable model of humanitarian finance, integrating all actors into a single government-led risk management system," added Mohamed Beavogui, ARC agency director general.
