First of its kind parametric reinsurance for cyclone launched in Africa
Pan-African re/insurer Africa Specialty Risks has launched an innovative parametric insurance product for Africa’s second most disaster-prone country to protect against the increasingly frequent impact of cyclones.
The innovative wind speed and rainfall cover has been structured by PULA in collaboration with the World Bank, and purchased by The Mozambique National Institute of Disaster Management.
Africa Specialty was the lead reinsurer in the inaugural Mozambique cyclone parametric placement.
The product, part designed by Africa Specialty Risks, will provide $35 million of cover, based on carefully calculated thresholds to provide resilience to the Mozambique economy against the destructive effects of cyclones and support recovery efforts. It will provide the state insurer with a pay-out when certain triggers are met.
The programme is the first of its kind for cyclone cover in Africa, designed specifically for the continent, and continuing the growth of parametric disaster cover across the continent.
During 2022, natural disasters caused a $313 billion global economic loss: 4% above the 21st-century average, of which $132 billion was covered by insurance, or 42% of total, according to the 2023 Weather, Climate and Catastrophe Insight report by Aon. In Africa severe flooding events were 2022’s worst natural disasters in Africa.
Mozambique is Africa’s second most disaster prone country: tropical storms and cyclones in Mozambique have increased in frequency and intensity because of higher ocean temperatures brought on by climate change. Since January 2022, Mozambique has been affected by three tropical storms or cyclones, affecting over 900,000 people and destroying around 220,425 hectares of crops due to flooding.
Antonio Jose Beleza, deputy director of the National Emergency Operations Center at INGD, said: “The cyclone program will provide crucial funding and stability to the Mozambique people and economy. The program will help build resilience in the economy, and highlights the importance of building risk mitigation instruments outside of the standard disaster risk insurance specifically designed to meet the increasing cyclone risk to Mozambique.”
Raveem Ismail, head of parametric underwriting, Africa Specialty Risks, added: "This collaboration brings together the expertise of multiple organisations to provide a comprehensive solution for cyclone risk in Mozambique. We are confident that this program will make a real impact in reducing the economic impact of cyclones on the communities and businesses in the region. This is an important policy for Mozambique, one which has been designed in Africa, to meet the growing need for cyclone insurance, and is an example of what is possible for insurance products across the continent.”"
Thomas Njeru, CEO, PULA, remarked: “We are pleased to have joined forces with the Institute of Disaster Risk Management of Mozambique, Africa Specialty Risks and the World Bank to deliver this cover to the Mozambique government. The program will help provide certainty for the most vulnerable communities in Mozambique, unlocking investment across the country with effective risk mitigation in place to protect against cyclones.”
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