Conducted by Sustainalytics, a leading ESG research, ratings and data firm, the evaluation is a comprehensive assessment of an organisation’s preparedness to meet future risks and opportunities linked to ESG factors, such as climate change, regulatory risk and reputational issues, on a scale of 0 to 100, with 0 indicating the lowest risk.

ARC Ltd.’s ESG score was calculated following an independent audit of the company’s business practices and policies. Improving from low risk last year at 10.2 to negligible risk this year at 5.7, Africa’s premier institution for disaster financing edges up two positions to claim top spot in the global insurance sector ESG risk rating. ARC Ltd.’s ESG risk rating is now the lowest among its global peers.

ARC Ltd. also retained its leadership position in the Diversified Insurance sector this year, with the lowest exposure among its peers (24.0) and strongest management score (80.3) in terms of how well it manages its ESG programmes, practices and policies.

In particular, ARC Ltd. scored negligible risk ratings in terms of Data Privacy and Security, Corporate Governance, Human Capital, Business Ethics and ESG Integration.

ARC Ltd. Chief Operations Officer Ange Chitate says the organisation’s top ESG score in the insurance industry is reflective of the leadership role it plays in helping to mitigate and manage the impact of climate change on the African continent.

“This independent validation of our commitment to sound ESG practices within the business bolsters our vision to cover the continent’s most vulnerable communities facing the vagaries of climate change events. We achieve this through partnerships with like-minded organisations that share our vision and commitment to sustainable ESG practices,” says Chitate.

As a leader in ESG among stakeholders in Africa’s insurance sector, ARC Ltd. is a signatory and driver of the Nairobi Declaration, aimed at committing the continent’s insurers to better integrate ESG into

their business models, in alignment with the goals envisioned by the Net- Zero Insurance Alliance.

“We are determined to play an active role in promoting the economic, social and environmental sustainability that has become so crucial in the world today. All stakeholders within the African insurance industry – from risk managers to insurers and investors – have a critical part to play in promoting sustainable development on the continent,” says ARC Ltd. CEO Lesley Ndlovu.

“We encourage others in the industry to take the initial step of becoming a signatory of the Nairobi Declaration, but also advise that it represents just the first footfall on a path towards numerous different activities and accommodations like those illustrated in our independent ESG risk assessment by Sustainalytics. We can all play our part,” Ndlovu concludes.

Sharm el Sheikh, 21 November 2022 –  Strengthening the reach and impact of the world’s risk pools is the key objective of a Memorandum of Understanding between African Risk Capacity Limited (ARC Ltd.), CCRIF SPC (formerly The Caribbean Catastrophe Risk Insurance Facility) and Pacific Catastrophe Risk Insurance Company (PCRIC) signed on the sidelines of COP27 in Sharm el Sheikh, Egypt.

The relevance and importance of the three global risk pools is clear especially in the face of the increasing frequency and intensity of climate change induced events. The MOU formalises and establishes a framework for enhanced cooperation and partnership among the three risk pools.

At the signing, Isaac Anthony, CCRIF CEO said: “This is an opportunity to take risk pools to the next level so that these are not just seen as insurance or mechanisms for transferring risk, but also are viewed as tools to scale up disaster risk finance in a very significant way to enable governments to provide higher levels of financial protection for their populations, including the most vulnerable.”

Anthony explained further that the MOU paves the way for the three risk pools to collaborate on sharing best practices in parametric insurance models, developing new and innovative DRF instruments and undertaking joint initiatives focused on advocacy, capacity building and training.

“One of the exciting things CCRIF is looking forward to is facilitating access to other types of DRF instruments. It will be important for example for the various risk pools to work collaboratively in engaging Global Shield, for example, to ensure that the role of risk pools is recognised in that particular effort,” Anthony adds.

The launch of Global Shield against Climate Risks at COP27 has been long awaited, said Lesley Ndlovu, ARC Ltd. CEO. This is one of the tangible achievements of the Egypt event, he said, which will “transform the DRF landscape”.

“The Global Shield is an essential element in helping risk pools scale up their efforts to make insurance more accessible, affordable and available to the people who need it the most in the face of increasing frequency and severity of natural disasters,” Ndlovu said.

“The signing of this MOU among the global risk pools, sets the tone for a higher level of collaboration and a strong foundation on which to strengthen each other and our efforts and initiatives going forward.”

The MOU includes the development and sharing of best practices in parametric model development and management, as well as data management relating to parametric insurance instruments.

Advocacy and capacity building will form a key component of joint activities to help raise understanding of the role of risk pools as development insurance facilities supporting economic and social development objectives of risk pools’ member countries.

As loss and damage continue to rise and developing countries struggle to fund insurance premiums, member countries recognize that insurance provided by these risk pools is a critical financial resilience mechanism which protects them against the impact of perils and helps them meet the rising cost of disasters fuelled by climate change, which is largely not caused by their own actions.

However, there are barriers to scaling up DRF, PCRIC CEO Aholotu Palu explained. “While risk pools play an important role in moving the management of disaster and climate shocks away from ad hoc humanitarian assistance and focus the DRM ecosystem on an ex-ante approach, there is still somewhat a lack of understanding of the role we play in helping countries protect their financial means to build resilience and shield themselves from loss and damage caused by climate change.

“Through the signing of this MOU, we elevate collectively the role we play in helping countries fight the impact of climate change.”

Ends

For more information about the global risk pool initiatives, please contact Susan Yee on susan@webmediasp.com or Claire Lathe at claire@bigambitions.co.za.

About ARC Limited

The African Risk Capacity Limited (ARC Ltd) is a financial affiliate of the African Risk Capacity (ARC), a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO SWISS, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.

About CCRIF

In 2007, the Caribbean Catastrophe Risk Insurance Facility was formed as the first multi-country risk pool in the world and was the first insurance instrument to successfully develop parametric policies backed by both traditional and capital markets.

In 2014, the Facility was restructured into a segregated portfolio company (SPC) to facilitate offering new products and expansion into new geographic areas and is now named CCRIF SPC. It is owned, operated and registered in the Caribbean.



CCRIF SPC limits the financial impact of natural hazard events to Caribbean and Central American governments by quickly providing short-term liquidity when a policy is triggered. CCRIF offers parametric insurance policies for tropical cyclones, earthquakes, excess rainfall, the fisheries sector and the public utilities sector.

CCRIF currently has 23 members.

About PCRIC

PCRIC is owned for the benefit of the island nations of the Pacific and is a specialist provider of disaster risk finance services and solutions to the region.

It delivers a programme of support built on leading-edge technical assistance, targeted collaborations, and innovative product options. Our mission is to help nations better prepare, structure and manage finances to foster disaster resilience and ensure rapid access to funds when they are needed most.

Parametric insurance: an effective tool in helping Africa fight climate change

JOHANNESBURG, 1 NOVEMBER 2022 – Africa loses as much as 15% of its gross domestic product per capita, every year, due to the impact of climate change. The socio-economic and environmental damage of drought, floods and cyclones further devastates a population where almost half live in extreme poverty (United Nations 2021).

With weather shocks increasing, African countries’ climate financing is at only 11% of what is required, and according to the African Development Bank, some US$1.6 trillion is needed for the continent to meet its nationally determined contributions (NDCs) – the climate action plan of Paris Agreement signatories to cut emissions and adapt to climate impacts.

Almost a year later, COP26 pledges of US$100 billion in climate finance have been slow to materialise, and it is clear that Africa needs to become more self-reliant.

An alternative risk solution

Parametric insurance is an alternative risk solution that eases the financial blow of natural disasters on vulnerable nations. It uses satellite data to determine pre-emptively the impact of a disaster and the required compensation, in the form of an insurance pay out, when that disaster strikes. This enables governments to deploy emergency relief quickly, often within days, instead of waiting for months until damage assessments are complete.

On the African continent, parametric insurance is still new but slowly gaining momentum. The African Risk Capacity (ARC) Group, a specialised agency of the African Union, has been making inroads since 2014, working with governments to create awareness, while motivating for the evolution of the appeals-based model to parametric insurance.

ARC also helps these governments improve their planning, preparedness and response to natural disasters. This is a significant differentiator among parametric insurers.

Pooling risk

Rapid urbanisation to under-resourced towns and cities has resulted in African countries’ disaster risk profiles evolving to include both rural and urban challenges, according to the multi-donor partnership, Global Facility for Disaster Reduction and Recovery (GFDRR), which also helps countries manage and reduce their disaster risk. This, compounded by the prohibitive cost of insurance, means most African countries remain vulnerable and ill-prepared for weather calamities.

UN Secretary-General António Guterres in April last year urged countries to “scale up catastrophe-triggered financial instruments such as risk pooling mechanisms”, citing the ARC Group as deserving of more investment. He also stressed that an adaption breakthrough was critical. ARC Group’s financial affiliate, ARC Ltd., currently provides parametric insurance to 35 sovereign member states across Africa, but as CEO Lesley Ndlovu points out, there are 55 countries in Africa and to effectively fight climate change, more need to come into the parametric fold.

“One of our greatest challenges is to forge a better understanding of how parametric insurance fits into disaster risk management, while also addressing the cost of insurance premiums,” explains Ndlovu. “Our sovereign risk pools offer a solution, as countries share the risk and cost. Once our member states have completed a capacity-building programme, they become eligible to join a risk pool.”

Through ARC Ltd.’s sovereign risk pooling, countries are grouped together, and the cost of their individual premiums is reduced. This is due to the risk being shared by the pool, as not all countries will experience natural disasters simultaneously. The funds go into an insurance coffer and are therefore available when needed. ARC Ltd. has paid out approximately US$125 million in claims, since inception, half of which was to a single pool last year, making the value of Africa’s participation in parametric insurance undeniable.

Africa may be holding out hope for the outcomes of COP27 but with the massive climate funding shortfall it already faces, it has never been more critical for the continent to look to strategic partners who can assist from within, while acknowledging that parametric insurance may be the lifeline it has been seeking.

Bridging the finance gap that impacts how Africa funds resilience

By Michel Jarraud, Secretary General Emeritus World Meteorological Organization and Board Member of African Risk Capacity (ARC) Ltd.

A growing climate emergency and its intensifying toll on African soil make climate adaptation and early warning systems critical focus areas in building resilience on the continent. The most effective way to confront the crisis is, firstly to be armed with information that allows one to prepare well in advance, and secondly to ensure a country has the resources to meet the demand for assistance when natural disasters strike.

The State of the Climate in Africa report (2021) provides sobering scientific data on temperature trends and other climate indicators. It reveals how extreme weather is undermining human health safety, food and water security, and socio-economic development. All this burden to bear, despite Africa producing only about 3% of the world’s greenhouse gas emissions that have led to climate change.

The temperature across Africa is rising faster than the global average, approximately +0.3°C per decade from 1991-2021, and it is accelerating. The report also mentions that high water stress is estimated to affect about 250 million people in Africa and is predicted to displace up to 700 million people by 2030. Four out of five African countries are unlikely to have sustainably managed water resources by 2030.

An emergency of this magnitude requires significant and practical actions to help countries finance resilience.

For a continent where livelihoods are largely weather and climate-dependent, climate change is having a particularly devastating effect and poses an urgent threat to human security in Africa. However, the harsh blows of poverty, inequality, and conflict over scarce resources can be softened using information from satellite data and ground instruments, as well as predictions of weather patterns and climate anomalies at an early stage. However, the density of ground observations is far below that recommended by WMO in many parts of Africa.

During the recent 77th United Nations General Assembly held in New York in September 2022, ministers supported the UN Early Warnings for All initiative, spearheaded by the World Meteorological Organization (WMO) as an urgent climate adaptation measure.

Canada and France committed to helping those most at risk of extreme weather and climate change. In New York, Canadian Prime Minister Justin Trudeau announced CAN$ 10 million in funding over four years for the Climate Risk and Early Warning Systems initiative (CREWS), while Chrysoula Zacharopoulou, France’s Minister for State for Development, Francophonie and International Partnerships said her government would double its annual contribution to CREWS, starting in 2023, to 8 million Euros per year.

As COP27 in Egypt draws nearer, climate adaptation will become an important discussion point with respect of the financial support of the necessary actions by industrialised countries.

Climate finance is indeed at the heart of the challenges that face all world leaders, not least of all Africa’s political and business leaders, as tropical cyclones, floods and drought bear down on the continent with increasing frequency. The socio-economic, ecological, and developmental benefits of climate finance investments will far outweigh the costs of implementing them.

Effective early warning systems are without doubt saving many lives. For example, recently in the United States when Hurricane Ian made landfall recently as a Category 4 storm, and in the Philippines when Typhoon Noru hit. Before them Hurricane Fiona caused deadly flooding in the Caribbean, and Typhoon Nanmadol led to the evacuation of at least 9 million people in Japan. However, in Africa, only 40 percent of the population have access to effective early warning systems.

Parametric insurance is a meaningful and practical approach to closing the finance chasm that exists between African countries and their ability to fund climate adaptation and early warning systems. The benefits include faster pay outs, flexibility in times of uncertainty and the ability to provide cover for difficult-to-model losses.

Reflecting a more dynamic approach to climate insurance, African Risk Capacity (ARC) Ltd. now covers, in addition to drought, tropical cyclone and flood risk. Much of Africa’s eastern coastline remains susceptible to tropical cyclones, making it more critical than ever for countries to join the pool for such risk.

The challenge that now faces the industry and Africa’s leaders is funding parametric insurance to help governments come to the aid of their most vulnerable people. ARC Ltd has already paid over US$65 million to seven countries to provide drought relief and meet the needs of their citizens. Recently, ARC Ltd. paid out US$2.1 million to Madagascar to assist at least 600 000 people affected by a devastating drought.

The State of the Climate in Africa 2021 report recommends strengthening early warning systems, and increasing transboundary cooperation, data exchange and knowledge sharing. More investment in adaptation is needed, along with a strong push towards integrated water resource management.

To illustrate the urgency around freshwater management, the report highlights that the total surface area of Lake Chad, which is located close to the Sahara desert, bordering Chad, Cameroon, Nigeria, and Niger, has shrunk from 25 000 km2 in the 1960s to 1 350 km2 in the 2000s. In West Africa, an uptick in temperature, drought, and increased water demand has led to the long-term decline in river flow, the report said.

These statistics may paint a bleak picture for a continent that is renowned for its vibrancy and ability to rise to a challenge. If we do nothing, the crisis will deepen, and our children will experience much harsher conditions. The decisions we don’t take now will have an impact in centuries to come, but it is still within our ability to do something impactful about it. We have a duty to do it.

Ends

About ARC Ltd.

The African Risk Capacity Limited (ARC Ltd.) is a financial affiliate of the African Risk Capacity (ARC) Group, a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd. is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, the Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO, SDC, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.

About Michel Jarraud

Secretary General Emeritus World Meteorological Organization and Board Member of African Risk Capacity (ARC) Ltd., former Chair of UN-Water.  Mr Jarraud is a scientist and a meteorologist with degrees from the prestigious French Ecole Polytechnique and the Ecole de la Météorologie Nationale.  He is a fellow of numerous Meteorological Societies including France, USA, United Kingdom and Africa, and honorary member of the Chinese and Cuba Meteorological Society.

Issued by Big Ambitions:

Natalia Rosa

natalia@bigambitions.co.za

083 449 4334

19 October 2022

Parametric development insurance shows real impact on African continent amidst calls for increased climate finance in run up to COP27

Climate finance is a hot topic in the run up to COP27. While Africa waits for developed nations to fulfil their aid pledges, climate financing is making a difference on the continent, but more needs to be done…

JOHANNESBURG, 27 SEPTEMBER 2022 – Less than two months to this year’s UN Climate Change Conference (COP27) in Sharm El-Sheikh, African leaders are turning up the heat on countries which pledged climate finance to help developing countries adapt to the effects of climate change but have not delivered.

Agreements in Paris and Copenhagen had earmarked billions of dollars for climate change mitigation and adaptation in places like countries in Africa which suffer many of the worst impacts of global warming yet share little of the blame.

Said Yasmine Fouad, Egypt’s Environment Minister recently: “We were not the cause the cause of these emissions, but it is us – our people and our natural resources – that are affected.”

At COP26 in Glasgow, new financial pledges were made – US$100bn every year in climate finance to support developing countries. It would seem we’re not there yet.

In its Landscape of Climate Finance in Africa report mapping climate finance flows in Africa, the Climate Policy Initiative estimates that Africa alone needs US$277bn annually to implement its Nationally Determined Contributions (NDCs) and meet 2030 climate goals. The continent needs US$2.8T in total between 2020-2030 to limit warming to 1.5°C and addressing the biggest impacts of climate change.

Africa’s annual climate finance flows stand at only US$29.5bn – a shortfall of US$247.5bn per year and just 11% of what’s needed. The non-profit’s stark warning in the run-up to COP27: “Time is of the essence; delaying action will cost the continent more in the future”.

Building resilience to climate change is of paramount importance in Africa, says Lesley Ndlovu, African Risk Capacity (ARC) Ltd. CEO.

A hybrid mutual insurer and financial affiliate of the African Risk Capacity Group, ARC Ltd. provides parametric insurance services to African Union member states and farmer organisations to pool disaster-related risk across Africa and transfer it to international risk markets.

“In doing so, we improve Africa’s response to climate-related disasters and contribute to resilience building and ultimately to food security. To this end, ARC Ltd. has paid out US$124,3m in claims from eight risk pools since 2014, transferred US$1bn risk and covered 30m people per year.

“In the past year alone, we paid out US$59.6m and covered 18m individuals in countries like Mali, Malawi and Madagascar,” says Ndlovu.

In 2022, the impact will be greater, with pay outs already having been disbursed to several African countries, including:

• Burkina Faso: US$1.19m for drought
• Madagascar: US$797,049 for drought and US$10.7m for tropical cyclone
• Mali: US$7.1m for drought
• Mauritania: US$1.14m for drought
• Malawi: US$14.2m for drought
• Zambia: US$5.3m for drought

These high levels of pay outs illustrate the value of a parametric insurance mechanism to meeting the needs of Africa’s most vulnerable. Insurance products help to build resilience by supporting the implementation of national disaster risk management policies and strategies, particularly the promotion of financial resilience to climatic hazards.

“As the premier institution for disaster risk financing on the continent, ARC Ltd. provides disaster risk insurance targeted at promoting resilience and providing financial protection to vulnerable populations in Africa when perils occur.

“The pay outs assist governments to support their affected populations quickly, helping them rebuild and recover from the effects of a drought or tropical cyclone and ensuring they have the means to bounce back swiftly instead of resorting to negative coping mechanisms,” Ndlovu explains.

The ARC Ltd. risk transfer and risk pool solution is the only affordable disaster-risk system on the African continent, says Hans Ramm, former Senior Policy Advisor for the Swiss Agency for Development and Cooperation (SDC).

“There’s no alternative system in sight for building greater resilience against natural disasters. All too often, traditional funding mechanisms are too late for small-scale farmers who must sell off their assets to ward of poverty and food insecurity.”

“As donors, we want to be assured that pay outs reach the poor and vulnerable communities they are intended to protect. ARC Ltd. lives up to its governance promises and pay outs to member states are verified by independent audits,” Ramm explains

Index Insurance Analyst at the World Food Program (WFP), Bwalya Namwawa, describes ARC Ltd.’s Replica Programme as a tool that can be used to execute activities on the ground swiftly after a climate-change disaster has occurred.

“We view insurance as one component of the entire disaster risk management agenda. Via ARC Ltd.’s Replica Programme, the WFP has ensured some level of certainty that, in the event of the onset of a natural disaster, there will be immediate pay outs related to the disaster’s predicted magnitude. This allows all involved to prepare before disaster strikes, instead of responding to the impact after it has happened,” says Namwawa.

Currently only 13 African countries participate in ARC Ltd.’s risk pools, indicating that there’s a great deal more work to do to achieve the organisation’s vision of extending climate risk financing to cover to the estimated 200m vulnerable people who bear the brunt of climate change impacts on the continent.

Funding premiums is the great challenge, Ndlovu explains. However, through strong partnerships with donors such as USAID, the Foreign Commonwealth and Development Office, KfW Development Bank, the Swiss Agency for Development and Cooperation, the African Development Bank, World Food Program and Start Network, ARC Ltd.’s impact is being felt on the continent.

“We need broader collaborations between private and public sector if we are to reach even more people and close the protection gap. As we prepare for COP27, a key discussion points must be how these partnerships can build a resilient continent able to respond to extreme weather events and, in doing so, protect the economic development gains made over the last few years. The problem is so big that all of us have a role to play,” Ndlovu concludes.

Ends

For more information about ARC Group, or to arrange an interview, please contact Claire Lathe at claire@bigambitions.co.za.

About ARC Ltd.

The African Risk Capacity Limited (ARC Ltd.) is a financial affiliate of the African Risk Capacity (ARC) Group, a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd. is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, the Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO, SDC, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.

To view our full Integrated Annual Report, click here.

ARC Ltd. releases Integrated Annual Report highlighting activities of Africa’s first sovereign parametric development insurer

Year of impact revealed in Integrated Annual Report outlining policies, pay outs and partnerships which protect Africa’s most vulnerable against the vagaries of extreme weather

JOHANNESBURG, 14 SEPTEMBER 2022 – Over 18m individuals covered and 14 pay outs totalling US$59.6 million are two of the key highlights illustrating the impact of ARC Ltd. on the African continent and revealed in the organisation’s Integrated Annual Report.

The 2021 report differs from previous annual reports in that its compilation and narrative reflect the organisation’s efforts to represent performance, not only in terms of financial information, but also in terms of how value is created, delivered and governed, thereby providing a broader context for performance data and business operations.

ARC Ltd. CEO Lesley Ndlovu described 2021 as a “year of impact”; a year which reflected the organisation’s raison d’être and commitment to making a difference in the lives of the vulnerable populations ARC Ltd. covers.

The US$59.6 million pay-out was the highest amount since ARC Ltd.’s inception, he explained in the report. “As a development insurer, this is cause for celebration and reflects that the ARC mechanism saves lives, protects economies and secures development gains.”

Highlighting the need to expand ARC Ltd.’s influence, Board Chair Dr Abdoulie Janneh said in the report: “ARC Ltd., as an affiliate of the ARC Group, is one of the most highly regarded organisations in the industry on the African continent. Yet, despite the success of our drought and tropical cyclone insurance products we are not yet at scale.”

Despite the reported growth limitations, ARC Ltd. had emerged as an indisputable leader and credible development insurer in member state countries – reflected not only in the policy and pay out achievements of 2021 and its BBB+ Fitch and international ESG ratings, but also in the donor and partner messages of support for the organisation, including kFW Development Bank, the UK Foreign, Commonwealth and Development Office and the Swiss Agency for Development and Cooperation.

Thanking these partners in the Integrated Annual Report, Ndlovu concluded: “In the wake of accelerating global climate change, food insecurity and epidemics, there is growing relevance and urgent need for parametric insurance. There is no time to lose. ARC Ltd. must act now.”

To view the full report, click here.

Ends

For more information about ARC Group, or to arrange an interview, please contact Claire Lathe at claire@bigambitions.co.za.

About ARC Ltd.

The African Risk Capacity Limited (ARC Ltd.) is a financial affiliate of the African Risk Capacity (ARC) Group, a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd. is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO, SDC, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.

ARC Limited hosts regional meeting to address role of insurance in fighting climate change impacts on African continent

• Ecosystem of ARC Limited shares opportunities and challenges of working together to fight impacts of climate change
• ARC an instrument that can protect Africa’s most vulnerable against the worst impacts of extreme weather

Johannesburg, 2 August 2022 – Representatives from ARC member states, Class A &C members and funding donor partners have met in Malawi to discuss how parametric insurance delivered through African Risk Capacity Limited has the potential to transform how the continent deals with climate-change induced events, such as droughts and cyclones.

This is the second such meeting bringing together stakeholders in the African Risk Capacity (ARC) ecosystem, aimed at bringing to the table opportunities and challenges experienced in the past year by stakeholders to ensure that the insurance mechanism offered by ARC, an organ of the African Union, swiftly assists Africa’s most vulnerable – this, in a year when ARC Limited has made a record pay-out of almost $60 million in claims.

Addressing delegates, ARC Limited CEO Lesley Ndlovu commented on the value of ARC on the African continent. “In the history of ARC, we have paid about US$125 million 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.”

Says Ndlovu: “Further, 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.”

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.

Beyond the assistance to African governments, Ndlovu also highlighted ARC Limited’s work in diversifying its products, including the development of flood and pandemic insurance – both of which were in pilot phase as stakeholders heard from presentations by representatives from Togo, Uganda and Senegal during the two-day event.

Further, an essential part of how ARC Limited intends to expand coverage to the countries with which it works is micro and meso insurance products (non-sovereign business). Several pilots have also been developed to this end in countries such as Côte d’Ivoire, Zimbabwe, Madagascar and Burkina Faso, among others.

ARC Limited’s overarching goal, Ndlovu shared with delegates, was to increase the participation of African countries in its insurance programme and position ARC Limited as Africa’s premier institution for disaster risk financing.

“Currently, we have 13 countries that participate out of 55 on the African continent. We need more to participate, and are also working very hard to bring partners into the ecosystem so we are able to overcome the two main barriers we face in the growth of insurance – the affordability of premiums and increasing capacity building so there is greater understanding of the role of insurance in disaster risk management,” says Ndlovu.

Also attending the event were key donor and humanitarian partners, which shared highlights of their work with African Risk Capacity. Among these were USAID, the World Food Programme, the Start Network, the African Development Bank, KfW Development Bank, the Foreign, Commonwealth and Development Office, Swiss Agency for Development and Cooperation, and Global Affairs Canada

Highlighting the importance partnerships, Ndlovu concluded the event saying: “We all know that Africa is a continent that is most exposed to climate-change-related risks and with ARC we have in our hands an instrument that can play a vital role in creating the solution to protect the most vulnerable African citizens against the worst impacts of extreme weather. It really is up to us to make this initiative a success,” Ndlovu concluded.

Ends

For more information about ARC Group, or to arrange an interview, please contact Simon Diouf, Communications Consultant at African Risk Capacity on simonpierre.diouf@arc.int or contact Claire Lathe at claire@bigambitions.co.za.

About ARC Limited

The African Risk Capacity Limited (ARC Ltd) is a financial affiliate of the African Risk Capacity (ARC), a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO SWISS, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.

Fitch revises ARC Limited’s Outlook to Positive; affirms IFS Rating at ‘BBB+’

• Fitch rating reflects ARC Limited’s strong capitalisation and good company profile
• ARC Limited’s enhanced development activities likely to increase its importance

JOHANNESBURG, 27 JULY 2022 – Fitch Ratings has revised African Risk Capacity (ARC) Limited’s Outlook to Positive from Stable and has also affirmed its Insurer Financial Strength (IFS) rating at ‘BBB+’ and Long-Term Issuer Default Rating (IDR) at ‘BBB’.

Announcing the news, the credit rating agency commented that this Outlook revision reflects ARC Limited’s “strong progress in meeting its development objectives, which if sustained, could support a stronger company profile assessment within the next two years”.

It added: “In Fitch’s view, the improvement in ARC’s premium base, risk pool and claim pay-outs enhances the company’s geographic diversification, franchise and operating scale. In addition, the improved reach of the company’s development activities is likely to further increase its importance to sponsors.”

Says Lesley Ndlovu, ARC Limited CEO: “We are delighted with this revision of our Outlook to Positive which reflects the work we have done to raise our company profile and improve portfolio diversification.

“We are confident that the support from our sponsors will only grow as we expand ARC Limited’s impact on the African continent in terms of our development activities and the number of parametric insurance pay-outs we have been making in 2022 to respond to cyclones and droughts.”

In addition to its strong growth in gross written premiums (GWP) in 2021, ARC Limited’s support from and oversight by the German development bank KfW through the Federal Ministry for Economic Cooperation and Development (BMZ) and the UK Foreign, Commonwealth & Development Office (FCDO) were cited as reasons for the revision.

ARC Limited’s key strength, adds Fitch, is its capital position. “We regard the returnable capital provided by KfW/BMZ and the FCDO of USD70 million at end-2021 as fully loss-absorbing, and consequently treat it as equity capital when assessing capitalisation and leverage. On this basis, ARC scored ‘Extremely Strong’ on Fitch’s Prism Factor-Based Capital Model based on end-2021 figures, unchanged from 2020. Fitch expects that further capital support could be made available as ARC continues to achieve its development goals.

ARC’s regulatory capitalisation is strong, with a Bermuda enhanced capital requirement ratio of 796% at end-2021 (2020: 1,628%),” it said.

“While our product portfolio is concentrated, dominated mainly by drought insurance, we are actively diversifying this. To that end, we introduced tropical cyclone cover in 2020 and are also expanding our offering to cover outbreak and epidemic, and flooding risks. In addition, we are expanding our insurance offering to non-sovereign entities and working to increase the number of African countries covered in our risk pool which we believe will help to elevate our standing in future Fitch ratings,” Ndlovu concludes.

Ends

For more information about ARC Group, or to arrange an interview, please contact Simon Diouf, Communications Consultant at African Risk Capacity on simonpierre.diouf@arc.int or contact Claire Lathe at claire@bigambitions.co.za.

About ARC Limited

The African Risk Capacity Limited (ARC Ltd) is a financial affiliate of the African Risk Capacity (ARC), a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO SWISS, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.

From left to right : General Mamy RAZAKANAIVO, Executive Secretary of Emergency Prevention and Management Unit (CPGU)/Prime Minister’s Office; Mr Koffi KONIN, Head of Government Services for East and Southern Africa, a.i., ARC; H.E. David ASHLEY, UK Ambassador to Madagascar and Comoros; Mr Fidiniavo RAVOKATRA, Minister of Water, Sanitation and Hygiene ; Mr Tahina RAZAFINDRAMALO, Minister of Digital Development, Digital Transformation, Posts, and Telecommunications; Mr Maximin CODJO, AfDB Country Programme Officer,  Ms. Pasqualina Di SIRIO, WFP Country Director and Representative.

Johannesburg 12 July 2022 – Representatives from the African Risk Capacity Group and the African Development Bank presented a symbolic US$797,049 cheque to the Government of Madagascar following delayed rains during the 2021-2022 agricultural season, which resulted in drought conditions across the country, particularly in the Grand South.

The ARC payout is the result of drought insurance taken by the country under the African Development Bank’s flagship programme ADRiFi, which financed 50% of the 2021/2022 insurance premium for sovereign drought risk transfer for the Republic of Madagascar.

This payout will be specifically used to strengthen the resilience of part of the approximately 1,024,523 people affected by drought, according to the estimate of the Africa RiskView software, a tool used by ARC to estimate the number of people affected by disaster events and the associated response costs.

“I would like to thank the African Risk Capacity Group, the African Development Bank, the German government, as well as multi-donor partners such as Switzerland and the United Kingdom, who provided premium support to the Government of Madagascar to enable insurance uptake. Your support to ARC and to countries across the continent is crucial to enable us to sustain membership in this vital insurance mechanism,” said Mr Tahina Razafindramalo, Minister of Digital Development, Digital Transformation, Posts, and Telecommunications.

In his remarks, United Nations Assistant Secretary-General and Director General of the ARC Group, Ibrahima Cheikh Diong said: “The payout made today not only supports vulnerable communities affected by drought, but also reaffirms the Government of Madagascar’s commitment to protecting its people against climate-induced shocks by actively participating in the ARC’s insurance mechanism.”

“Madagascar is, unfortunately, one of the African countries hardest hit by the impact of climate change. However, the government’s foresight to take out drought insurance meant that we were able to work together to develop a pre-emptive contingency plan, detailing how the payout would be used. The swift release of funds means the most-affected communities can now be assisted as a matter of urgency,” said Lesley Ndlovu, CEO of ARC Limited, the insurance affiliate of the ARC Agency.

In establishing a framework for collaboration, ARC and the African Development Bank signed a Memorandum of Understanding in March 2017 to support African states to manage disaster risks and to be better prepared to effectively respond to climate-related perils that seriously affect the continent. It is within this framework that the Bank provided financial support to the Government of Madagascar for the payment of its insurance premium over a period of 5 years (2019-2023) through the ADRiFi programme.

“This is the third insurance payout via the African Disaster Risk Financing Programme and ARC to the Government of Madagascar. The combined total of more than $13.5 million to boost the government’s ability to provide services that are keeping thousands of vulnerable people from food insecurity or migrating in search of food and work, demonstrates the Bank’s sustained commitment to building African nations’ resilience to climate change,” said Dr Beth Dunford, African Development Bank’s Vice President for Agriculture, Human and Social Development.

Media Contacts

For the African Risk Capacity Group: Simon Pierre Diouf, Communications Officer, email: simonpierre.diouf@arc.int

For Madagascar: Mrs. Mbolatiana Andriamiarinosy, Government Coordinator for the ARC Programme, email: andriamiarinosy@yahoo.fr

For the African Development Bank: Alphonso Van Marsh, Principal Communications and Events Officer, email: avanmarsh@afdb.org

About the African Risk Capacity Group

The African Risk Capacity Group consists of ARC Agency and ARC Limited. ARC Agency was established in 2012 as a Specialized Agency of the African Union (AU) to help its Member States improve their capacities to better plan, prepare and respond to climate-related disasters. ARC Ltd is a mutual insurance facility providing risk transfer services to the Member States through risk pooling and access to reinsurance markets. ARC was established on the principle that investing in preparedness and early warning through an innovative financing approach is highly cost-effective and can save upward of four dollars for every dollar invested ex-ante approaches.

With the support of the United Kingdom, Germany, Sweden, Switzerland, Canada, France, the European Union, the Rockefeller Foundation, and the United States, ARC assists the AU Member States in reducing the risk of loss and damage caused by extreme weather events affecting Africa’s populations by providing, through sovereign disaster risk insurance, targeted responses to natural disasters in a more timely, cost-effective, objective, and transparent manner. ARC is now using its expertise to help tackle some of the other most significant threats faced by the continent, including floods and outbreaks & epidemics.

Since 2014, 90 policies have been signed by the Member States for cumulative insurance coverage of US$900 million for the protection of 90 million vulnerable populations in participating countries.

For more information, please visit: www.arc.int

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Issued locally by

Claire Lathe | Big Ambitions

claire@bigambitions.co.za

JOINT AU / ARC Press Release

We must shift our disaster risk architecture as climate disasters threaten African continent – ARC Limited CEO on International Day for Disaster Risk Reduction

• Climate change must be our greatest priority in disaster risk reduction space
• Africa must build resilience proactively if it is to change the disaster risk architecture

JOHANNESBURG, 13 OCTOBER 2021 – With COP26 around the corner, our focus should be on the devastating impact of climate change as we mark International Day for Disaster Risk Reduction today, observed annually to raise awareness about disaster reduction risk.

That’s the word from Lesley Ndlovu, CEO African Risk Capacity (ARC) Limited, a specialist insurance company that provides parametric coverage to African countries against extreme weather events and natural disasters.

Alarm bells for humanity have been sounded around issues of climate change, following the recent release of the Intergovernmental panel on Climate Change and increased media interest around the UN’s climate talks in November.

In Africa, the UN’s GAR Special Report on Drought warned that drought may well be the next pandemic as Africa faces “exponential collateral damage” posing systemic risks to its economies, infrastructure investments, water and food systems, public health, agriculture, and livelihoods, and threatening to undo its modest development gains and slip into higher levels of extreme poverty.

There simply is no time to lose in “acting decisively”.

Shifting the disaster risk architecture

Advocating for a shift in the current disaster risk architecture, Ndlovu believes the response is unacceptably slow, inefficient, and reactive, as climate disasters increasingly threaten Africa, a continent that bears the brunt of climate change, but has contributed the least to climate emissions.

“It takes far too long for African countries to mobilise the immediate resources they need for relief efforts, to save lives and livelihoods. The traditional disaster response is extremely slow and inefficient and, by the time governments and NGOs have raised enough money to respond meaningfully, the problem has become much worse, and more funding is needed,” says Ndlovu.

ARC Group’s role as a parametric insurer is critically important in building resilience and ensuring a country is able to bounce back swiftly after a natural disaster. “We monitor the rainfall of countries in the risk pool and sovereign insurance pay outs from ARC Limited are triggered when the system reveals that there hasn’t been enough rain, before droughts get to a crisis stage, farmers are left with nothing and people are starving,” explains Ndlovu.

The programme further helps countries build capacity to manage climate-related risks. In this way it attempts to shift the disaster risk management architecture to be proactive, not reactive, says Ndlovu.

“When dealing with risk mitigation and management, one needs to examine the reason why governments don’t act. On the insurance side, one of the issues to address is around premium affordability because it’s quite expensive to insure against natural disasters and payment of premium competes against other national priorities,” explains Ndlovu.

Sovereigns which participate in the ARC programme must also develop a contingency plan which sets out at a very high level how the government would spend any insurance pay out they receive from ARC Limited.

“Through this plan, we ensure the funds get to the intended beneficiaries. Having a plan increases dramatically the speed of execution because at a point the government received the funding, it already has a plan on how to disburse this,” he says.

Insurance builds resilience

Emily Jones, Climate and Disaster Risk Financing Advisor for WFP, highlights the challenges of convincing authorities to be more proactive than reactive when preventing human suffering and hardship when events like drought occur.

“Unfortunately, no one person or organisation can make the necessary shift alone. Change starts with building resilience and insurance plays a significant role in that, particularly in climate change,” says Jones.

Governments pay a premium every year and receive their agreed-upon pay-out if and when a predicted disaster occurs. “This money can then be used to help those people affected, with the remainder of the pay-out going towards covering other consequences that might not have been expected, such as conflict or a loss of progress in terms of important local development projects,” she says.

“Humanitarians are working on highlighting the need to predict crises and act before they manifest to avoid human suffering. After all, why wait if you don’t have to?”

ARC Limited is the first African company to join the UN-convened Net-Zero Asset Owner Alliance. With US$100 million in its kitty, the organisation has the largest balance sheet dedicated to climate risks in Africa.

Ends

For more information about ARC Group, or to arrange an interview, please contact Chinedu Moghalu, Senior Communications Officer at African Risk Capacity on chinedu.moghalu@arc.int; Ange Chitate, Chief Operating Officer, ARC Ltd, or contact Claire Lathe at claire@bigambitions.co.za 

About ARC Limited

The African Risk Capacity Limited (ARC Ltd) is a financial affiliate of the African Risk Capacity (ARC), a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies.

ARC Ltd is a mutual insurance facility comprised of its members, which have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.

The membership also includes its capital contributors who have provided premium subsidies, including USAID, FCDO SWISS, KFW/BMZ, IFAD, AFDB, WFP and STARTNETWORK.