The agricultural sector is the economic backbone of Africa, where an estimated 33 million smallholder farms and the farmers who live on them contribute to 70% of the continent’s food supply. Africa produces all the principal grains and other diverse crops, including rubber and cocoa in the tropical regions; soya and sorghum on the plateaus; tea, coffee, and flowers in the high-altitude areas; as well as Mediterranean crops. However, climate phenomena such as El Niño and increasing extreme weather events, due to climate change, such as tropical cyclones, floods and droughts, are decimating crops, and the resilience of the land and its ability to adapt are being pushed to their limits. Meanwhile, the demands on this vital resource are reaching critical thresholds.

Climate change also modifies the properties of soil, both chemically and physically leading to land degradation. Soils become less fertile, lowering crop yields and this impacts on agricultural production. Land degradation is already a major issue in Africa, due to poor soil health, and this is threatening the foundation of its citizens’ livelihoods – because they cannot afford to mitigate it.

The president of the African agricultural transformation institution, AGRA, Dr Agnes Kalibata, estimates that land degradation costs farmers up to $1,400 per year. According to the global research partnership CGIAR, 65% (494 million hectares) of Africa’s soil is currently degraded. Eighty-three percent of sub-Saharan Africans rely on this land for their livelihood. As a result, yield gaps on the continent are wide, ranging from as little as 2% to over 50%.

Substantial investment in Africa’s agricultural sector is needed, however, the visible impacts of climate change have caused investors to be wary. Other funding impediments include default risks and political risks. Giving farmers access to the right financial resources to address land degradation and climate change challenges would result in more progress being made towards achieving the objectives of the African Union Agenda 2063, which include the transformation of African agriculture and food security.

Closing the gaps

With the Russia-Ukraine war having increased global food insecurity by impacting production and crop exports out of the former agricultural powerhouse of Ukraine, a significant opportunity exists for Africa. By improving yields and insuring them against climate risks, African farmers could help close the gap, unlocking immense economic growth and development potential. Tapping into finance would also help farmers expand into the 60% of arable land that is still uncultivated on the continent.

As part of the Comprehensive African Agricultural Development Programme (CAADP), an initiative that forms part of the African Union Agenda 2063, African governments have committed to allocating at least 10% of their national budgets to agriculture and rural development. But this might still not be enough.

Another way in which governments could assist farmers is through subsidising climate insurance. Farmers with their limited resources are reluctant to take out premiums due to the cost, making derisking the industry not only the answer but also a huge economic opportunity. The reduction of risk would encourage investment. Private sector involvement is critical to driving investment, innovation and addressing the challenges in the industry.

Making an impact

The work of parametric insurer and financial affiliate of the ARC Group, African Risk Capacity Limited (ARC Ltd.), exemplifies the impact that is possible through addressing farmers’ specific needs and forging strategic partnerships. “There is no story that can be told about African development without taking into account agriculture and the need to protect investments in the sector,” says ARC Ltd. CEO Lesley Ndlovu.

The company provides insurance to small- to medium-scale farmers in Africa through micro or meso products. With micro insurance, farmers’ assets are insured, and their income is protected, and with meso insurance, banks are insured against a portfolio of loans. “A severe drought in a region will result in a spike in defaults. These defaults can be protected by insurance to avoid the accumulation of risk,” says Ndlovu. As a result, banks can free up more lending than they would usually be comfortable with, helping enhance access to finance so that farmers can invest in improving productivity and income.

ARC Ltd. has also been involved in several projects across Africa targeting farmers. In Côte d’Ivoire, the company, together with the Côte d’Ivoire Environment and Sustainable Development Ministry (MINEDD) and the United Nations Development Programme (UNDP), initiated a climate insurance pilot for agricultural value chains, run in collaboration with the FUSCOP RIZ CI “COOP-CA”, a federation of rice producers and their board of directors. Following the successful pilot, and with more partners on board, such as the World Food Programme, the project was expanded to include cocoa production with the aim of replicating it further across other agriculture value chains, such as cotton and maize. The project issued its first payout earlier this year of 16 million CFA francs to 3 594 rice and cocoa producers.

In the Horn of Africa, ARC Ltd. is helping fight the impact of the dual hazards of drought and excess precipitation on farmers in Djibouti. The first-ever multi-year, multi-peril agreement on the continent was signed in 2023 between the government and the ARC Group. It has given the country access to five years of disaster risk management capacity building and disaster risk insurance coverage for drought and excess precipitation.

ARC Ltd. has also partnered with the US Government (USG) on a $11.7 million project over three years to protect vulnerable smallholder farmers and African governments against climate risks. “Our priority with this grant is to provide coverage to 19 states,” explains Project Head and ARC Ltd. Chief Operating Officer Ange Chitate. “With the support of the USG, we will be refining and developing innovative products to meet the evolving needs of these countries.”

The project has two goals. The first is to work closely with governments so that they can better manage natural disasters by using parametric insurance.  In a collaborative approach, ARC Ltd. customises risk models for countries and helps governments integrate parametric insurance into their policy frameworks.

The project also aims to increase the uptake of parametric insurance by working with the African Union and regional economic communities. The significant advantage of parametric insurance is that it enables a rapid payment of claims, typically within 10 business days of a disaster, to fund emergency relief efforts and rebuilding.

ARC Ltd.’s plans for the continent’s agricultural sector include developing demand-driven micro and meso insurance and diversifying beneficiaries – including pastoralists locally and humanitarian organisations globally.

With escalating climate risks, innovative financing solutions like parametric insurance have significant potential to safeguard farmers’ livelihoods and drive development across the continent. Increased awareness and understanding are essential to encourage uptake. More investment in this space and policy reforms are also imperative to scale up climate risk management strategies and to empower Africa’s farmers.  

**Ends**

For more information about The African Risk Capacity Limited (ARC Ltd), or to arrange an interview, please contact Sonnette at sonnette@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.

JOHANNESBURG – For the fourth year in a row, specialist insurer African Risk Capacity (ARC) has secured the top ranking in the insurance industry for environmental, social and governance (ESG).

After an assessment by leading independent research, ratings, and analytics company Sustainalytics, ARC Ltd. was accorded an ESG risk rating of 8.2, indicating an overall negligible risk, and outperforming 302 of its peers in the insurance industry. It also ranks first in the diversified insurance services subindustry category, and 118th in the global universe out of 15 974 as at the last update of 16 February 2024.

Sustainalytics provides investors around the world with an assessment of how well companies are managing corporate governance and ESG factors. Companies are scored on a scale of 0 to 100, with 0 indicating the lowest possible risk.

An unwavering commitment to sustainability

Other highlights from the Sustainalytics report are the fact that ARC Ltd. achieved negligible risk ratings in three categories – business ethics, human capital, and ESG integration. It further received low risk ratings for corporate governance and data privacy and security.

ARC Ltd.’s low risk exposure to material ESG issues demonstrates a strong risk management ethos and robust leadership. The company has an unwavering commitment to sustainability, social responsibility, and ethical governance – a fact that has cemented its partnerships with organisations that share its vision for Africa.

“Economic, social and environmental sustainability has become crucial in the world today, and we are proud of our consistent top ranking by Sustainalytics,” says CEO of ARC Ltd. Lesley Ndlovu.

Adds COO Ange Chitate, who heads up ESG at the company: “This achievement reflects our unwavering commitment to ESG principles. Our team has been instrumental in integrating sustainable practices into every facet of our operations and our No. 1 position is due to their hard work and dedication.” 

Promoting sustainable development

When rating companies, Sustainalytics scrutinises business practices and policies, and also pays attention to critical factors, such as business model, financial strength, geography and incident history. ARC Ltd. consistently performs above its peers.

The company is also a leader in ESG in Africa’s insurance sector and a signatory of the Nairobi Declaration on Climate Change, which urges African insurers to integrate ESG into their business models, in alignment with the goals envisioned by the Net Zero Insurance Alliance.

“The insurance industry has an important role in promoting sustainable development in Africa and we continue to advocate for ESG integration on the continent,” concludes Ndlovu.

**Ends**

For more information about The African Risk Capacity Limited (ARC Ltd), or to arrange an interview, please contact Sonnette at sonnette@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.

JOHANNESBURG – African Risk Capacity (ARC) Limited has appointed Susan Kasinga and Helen Amarquaye as non-executive directors to its Board. Both women bring specialised technical experience in finance and insurance with them.

Susan Kasinga has over 30 years of experience in the financial industry and is a certified public accountant (CPA), certified public secretary (CS), and certified executive coach. She has expertise in raising capital through debt or equity for privately and publicly quoted companies. She also has a demonstrated track record of delivering growth, transformation, and return on investment for various stakeholders, including investors, shareholders, and pensioners.

Susan has been a director on the boards of nine blue-chip companies over the past seven years. She is a former chair of CIC Asset Management and currently chairs the Audit Committee for UAP Insurance, Bank of Africa, and QBS Ltd.

She currently chairs the audit and risk committee of Old Mutual General Insurance Kenya and the audit committee of QualiBasic Seed Company Limited.

Helen Amarquaye is a risk management and compliance professional with over 25 years of cross-industry experience in the insurance, telecommunications, and fast-moving consumer goods (FMCG) industries. She is also a qualified chartered insurer through the UK’s Chartered Insurance Institute.

Helen has held various senior management, risk management, underwriting, and audit roles across multiple organisations in the UK and Ghana, including her current role as the Board Chair for Old Mutual Insurance Ghana. She was formerly the controls, compliance, and ethics director at Guinness Ghana Breweries Plc, part of the Diageo group.

“We are pleased to welcome Susan and Helen to our Board of Directors. Their wealth of experience, unique expertise and understanding of our operating environment form a rare combination and will serve to complement the strength of our Board,” says ARC Ltd. CEO Lesley Ndlovu. “Their appointments also further reinforce our commitment to fostering diversity and inclusivity at the highest levels of leadership. We look forward to their strategic guidance and valuable contributions.”

TheBoardroom Africa was enlisted to fulfil the mandate of these appointments due to the recruitment company’s expert, diverse approach to searching for talent. It is dedicated to promoting exceptional African talent to board and executive positions globally.

The collaboration with ARC Ltd. for these recent appointments comes less than a year after the successful placement of two other non-executive directors on the Board.

**Ends**

For more information about The African Risk Capacity (ARC) Limited, or to arrange an interview, please contact Sonnette at sonnette@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 START NETWORK.

About TheBoardroom Africa

TheBoardroom Africa (TBrA) is the region’s premier business dedicated to promoting exceptional, diverse talent to board and executive positions in Africa and across the globe. We are especially committed to addressing underrepresentation in leadership roles and transforming the presence and influence of African talent on a global stage. Our services are unique and comprehensive, offering a one-stop solution for talented executives seeking to advance their leadership careers and a sanctuary for businesses needing support in transforming their leadership spaces.

Held on 5 October 2023, the summit facilitated strategic engagement for the CEOs of African Risk Capacity Limited (ARC Ltd, a financial affiliate of the ARC Group), the Pacific Catastrophe Risk Insurance Company (PCRIC), the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) including Central America, and senior advisors for the Southeast Asia Disaster Risk Insurance Facility (SEADRIF). These organisations form the Sovereign Risk Pools, established to serve sovereign climate and disaster risk insurance objectives of nearly 100 nations globally. 

The summit also welcomed representatives of the World Bank Group, Hiscox, the UK’s Foreign, Commonwealth & Development Office (FCDO), the Sustainable Markets Initiative, the Insurance Development Forum, the Global Shield and the Global Shield Solutions Platform. They joined strategic discussions about disaster finance trends and gaps, and how the Sovereign Risk Pools can collaborate to scale-up the availability of pre-arranged disaster finance to serve public disaster response needs.

The Sovereign Risk Pool executives have agreed to cooperate under the joint MoU as follows:

• to establish principles defining development insurance programmes;
• use pre-arranged finance to support SDG country development objectives, including protecting vulnerable populations;
• accelerate innovation;
• expand access to disaster risk finance for public benefit; and
• to seek the capital required to reach scale globally.

“We are pleased that the pools also agreed to collaborate more extensively to develop parametric models and to further explore meso- micro and replica schemes to complement sovereign-level risk transfer,” says ARC Ltd. CEO Lesley Ndlovu. “This is our area of expertise, and where we can share knowledge and best practices.”

The pools also confirmed a shared interest in exploring the establishment of a joint reinsurance facility to serve global risk transfer access to global capital markets, which is needed in addition to base capital required to enable expanded insurance offerings to countries.

**Ends**

For more information about The African Risk Capacity Limited (ARC Ltd), or to arrange an interview, please contact Sonnette at sonnette@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.

• The aim is to financially protect additional vulnerable households in drought-prone areas

JOHANNESBURG – African Risk Capacity (ARC) Ltd. has come on board to assist the Malawi Government with an insurance innovation that will scale up the World Bank’s Social Support for Resilient Livelihoods Project (SSRLP) in the country. This will see Malawi’s flagship safety net – the Social Cash Transfer Programme (SCTP) – reinforced with a risk transfer instrument to provide additional liquidity for the response to future droughts. It forms part of an upscaling and risk-layering approach to protect additional vulnerable households against climatic shocks and ensure earlier and rapid access to funding.

The Malawi National Local Government Finance Committee has been implementing the World Bank’s SSRLP since June 2020 to improve resilience through strengthening the national platform for safety nets. The project aims to build human capital among poor and vulnerable populations through Social Cash Transfers (SCTs), livelihoods support (LS), Enhanced Climate Smart Public Works (CSEPWP), as well as an option for scalable financing for SCTs to reach more affected households followings weather-related disasters.

Currently, the SCTP includes a mechanism to scale up the response to droughts in six districts in Malawi. The government’s long-term vision, however, is that of making it a national mechanism targeting all 28 districts, and one that responds to a wider range of climate risks and leverages more sources of financing, including donor funding. To this end, the government has made significant investments in the SCTP registration and payment systems, and institutional decision-making processes, to mitigate delays in reaching vulnerable households with cash support at the onset of
a drought.

The approach also harnesses a new insurance product specifically designed for the government to fund this scale-up, underwritten by the parametric insurer and financial affiliate of the ARC Group, ARC Ltd. It will be partly used to cover the costs of scaling up the SCTP in the 2023/24 and 2024/25 agricultural seasons, should rainfall deficits occur. This will be complemented by additional flexible contingency financing to act as a deductible to the insurance product. Funding support for this is provided by the World Bank and the Global Shield Financing Facility.

Introducing a shock-responsive mechanism

Poverty is pervasive in Malawi, with 75% of the population living below the international poverty line. The economy relies on agriculture, which accounts for more than a quarter of the GDP, and a significant percentage of the population relies on rain-fed smallholder agriculture. However, increasing natural disasters, such as cyclones, droughts, and floods, have resulted in destroyed or failed harvests and food insecurity.

“In the event of a disaster, the immediate reaction among individuals is to engage in negative coping behaviours to survive, such as selling assets like their livestock. This results in increased poverty,” explains Scalable Component Co-ordinator at the Malawi National Local Government Finance Committee, Mulder Mkutumula.

By connecting Malawi’s social protection system — the (SCTP) — to disaster risk financing instruments, the government has been able to introduce a shock-responsive mechanism that scales up the early cash-transfer response to additional vulnerable households when rainfall levels and food insecurity indicate drought conditions. “Providing the very poor households with resources before the impact of a drought is felt, helps prevent negative coping behaviours,” says Mkutumula.

Pre-defined triggers and pre-identified vulnerable households allow the government to model the potential cost of the SCTP scale-up mechanism, develop a cost-effective financing plan, and pre-arrange financing instruments. The financing plan is combined with a contingency fund for small scale-ups and the risk transfer instrument for larger scale-ups. Combining these two instruments provides the government with the financial resources required for the scale up.

“The World Bank sees Shock Responsive Social Protection mechanisms as key to ensuring that financial support quickly reaches vulnerable households after a shock. Demonstrating how this can work is a vital contribution to investments in human capital resilience, investments that are so necessary as shocks become more frequent and potentially harmful. With the support of the Global Shield – Financing Facility, the government has combined social protection delivery mechanisms with a financing plan, which the risk transfer policy is one part of. We expect to learn a lot from the mechanism being implemented in Malawi.” Practice Manager for Social Protection and Jobs for East Africa at the World Bank, Robert Chase

Application in the field

The SCTP scale-up mechanism was first implemented during the 2021/22 rainy season in the three districts of Blantyre, Ntcheu, and Thyolo. Around 74,000 households were made eligible for a cash transfer. A drought, followed by compounding shocks, resulted in an additional cash transfer for approximately 320,000 individuals totalling US$6.3 million, which the government withdrew from its contingency reserves.

For the 2022/23 season, the mechanism was expanded to cover three additional districts, namely Chiradzulu, Karonga and Nkhotakota, and reached 500 000 people (about 100 000 households) in the six districts where it was implemented.

Building on innovation with innovation

“ARC Ltd. and the Government of Malawi designed the insurance product so that it is aligned with country’s existing triggers for the SCTP scale-up mechanism. This is a ground-breaking innovation for ARC,” says Head of Business Development David Maslo. He adds that the development of insurance products for social protection is growing in Africa, fuelled by a great need. “This new product is a step in the right direction towards managing the impact of climate change in Africa so that all those impacted will be assisted. It is a model to replicate throughout the continent.”

Maslo points out that combining financial instruments and following a risk layering approach can help address the cost of the disaster response. “The structure of the policy is such that the Malawi Government retains some of the risk through their contingency fund. It also enables the triggering of the insurance product for more severe droughts and increases the overall coverage and value proposition. In this way, diverse financial instruments are used appropriately and optimised to enhance the disaster risk financing strategy of the government.

“This is also complemented by the ARC Sovereign insurance policy, which covers some of the other response costs incurred by the government in the event of a severe drought. With our deep understanding of disaster risk financing, we continue to assist our member states, such as Malawi, to diversify their DRF portfolio with a range of products that are fit for purpose. We are also delighted to simultaneously be growing our partnership with the World Bank.

Says ARC Ltd. CEO Lesley Ndlovu: “This innovation follows shortly on the heels of our pioneering multi-year, multi-peril product designed for Djibouti, which saw us covering excess precipitation for the first time in our history. In Malawi, we have demonstrated once again the company’s inherent agility and flexibility in being able to underwrite a policy on a new product and a new set of indices,” he concludes.

**Ends**

For more information about The African Risk Capacity Limited (ARC Ltd), or to arrange an interview, please contact Sonnette at sonnette@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.

JOHANNESBURG – Fitch Ratings has upgraded African Risk Capacity (ARC) Limited’s outlook to stable with an Insurer Financial Strength (IFS) rating of ‘A-‘ and a Long-Term Issuer Default Rating (IDR) of ‘BBB+’.

The credit rating agency notes the upgrade is due to ARC Ltd.’s “strong progress in terms of meeting its development objectives, demonstrated by enhanced claim payouts to affected African sovereigns, product diversification and improving the reach of its development activities. Strong progress in product diversification initiatives and the improving franchise have also led to a higher company profile score of ‘bbb’.” Fitch has referred to the commitment and credit quality of ARC’s sponsors. The company enjoys the support and sponsorship of the German development bank KfW through the Federal Ministry for Economic Cooperation and Development (BMZ), and the UK Foreign, Commonwealth and Development Office (FCDO). This is in the form of capital contributions, governance oversight and premium subsidisation.

ARC Ltd.’s specialisation as a parametric insurance provider and its strong track record in claims payouts have boosted its company profile. The introduction last year of an outbreaks and epidemics product followed by a flood risk product this year have strengthened and diversified its portfolio. “ARC’s operating scale remains small, with reported gross written premiums of USD23 million in 2022, a drop from USD31 million 2021 due to the non-renewal of some contracts during the year. However, premiums so far in 2023 have strongly recovered and Fitch expects the company’s growing reach and diversification initiatives to support growth in the medium-term,” the rating agency stated. Fitch deems ARC Ltd.’s capital position as another key driver for the upgrade. “We regard the end-2022 USD68 million returnable capital provided by KfW/BMZ and the FCDO 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 (FBM) based on end-2022 figures, unchanged from 2021.”

The rating agency says it expects that ARC Ltd. could garner further capital support as it continues to achieve its development goals. Meanwhile its regulatory capitalisation remains strong, with a Bermuda enhanced capital requirement (ECR) ratio of 387% at end-2022 (2021: 796%).

Comments Lesley Ndlovu, ARC Ltd. CEO: “We welcome the Fitch upgrade and see it as a reflection of our efforts to protect African nations from the increasing impact of climate change. It is also an acknowledgement of our drive to diversify our portfolio – we now cover the four major perils of drought, flood, tropical cyclone, and outbreaks and epidemics. Going forward, we will continue with our mission of signing up at least 35 African countries and covering more than 200 million people annually by 2025.”

**Ends**

For more information about The African Risk Capacity Limited (ARC Ltd), or to arrange an interview, please contact Sonnette at sonnette@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.

Madagascar has contingencies to aid its swift recovery from devastating impacts of tropical cyclones

• Madagascar was the first African nation to invest in tropical cyclone insurance with ARC Ltd.
• US$10.7m pay out by ARC Ltd. following cyclone Batsirai helped island nation to rebuild

JOHANNESBURG, 27 FEBRUARY 2023 – The unusually protracted journey cyclone Freddy led across the Indian Ocean this past month was a stark reminder of the vulnerability African nations like Madagascar grapple with, in the face of hazards such as tropical cyclones that could worsen with climate change.

As the world watched Freddy travel a vast distance across the South Indian Ocean from the northwest coast of Australia to island nations thousands of miles away, Madagascar braced itself for another battering – just over a year after cyclone Batsirai wreaked havoc, one of four storms that hit the island nation that year.

Moving across Madagascar last week, cyclone Freddy brought with it a storm surge of between one to two metres and 175km per hour winds, according to KinetiCast, an online platform providing global insights on tropical cyclone hazards and impacts.

KinetiCast is run by Kinetic Analysis Corporation, which created the tropical cyclone model for Africa’s premier institution for disaster risk financing on and for the African continent, African Risk Capacity Limited. The real-time-data it produces powers ARC Ltd.’s Tropical Cyclone Explorer and led to a pay out of US$10.7m to Madagascar last year to help the country recover from the effects of cyclone Batsirai.

Kinetic Analysis Corporation’s CEO, Richard Murnane, explains: “We use data generated by official agencies such as the Joint Typhoon Warning Centre and Meteo France La Réunion, among others, to generate a geospatial footprint of the hazards associated with a tropical cyclone – winds, waves, storm surge and rainfall – as well as its impact and damage in terms of populations affected and purchasing power parity losses.”

While cyclone Freddy brought less rain than feared, it flattened rice fields and fruit trees, damaged property, displayed 11,000 people and killed five people.

“In the case of cyclone Freddy, almost two million people in Madagascar were subjected to hurricane-strength winds and over 20,000 were in areas subject to storm surge,” Murnane adds.

Due to its geographical position, Madagascar has borne the brunt of the south-west Indian Ocean cyclone season which runs from November to April. Last year, it brought several storms to the African island nation’s shores including the devastating cyclone Batsirai, tropical storm Ana, tropical storm Dumako and tropical storm Emnati.

Besides the loss of life, these storms bring flooding, wind damage, destruction to property and infrastructure, and landslides. Villages and towns are cut off, people displaced, schools destroyed, and access to clean drinking water, electricity and supplies severely hampered. In the case of Batsirai, some 121 people were killed and 75,000 displaced.

However, Madagascar is covered within ARC Ltd.’s parametric insurance risk-pooling facility – the first African country to have signed up for sovereign parametric cyclone insurance protection since the organisation launched its cyclone product in the second half of 2020. The country took out a policy, fully co-financed by KfW Development Bank and ADRiFi Multi-Donor Trust Fund.

“Based on ARC Ltd.’s tropical cyclone model, we identified that more than six million people were exposed to cyclone Batsirai. Shortly after the cyclone, ARC Ltd. made a pay out of US$10.7m to enable the country to start rebuilding,” says Lesley Ndlovu, CEO ARC Ltd.

“Our parametric insurance triggers ensure rapid deployment so that assistance can reach those who need it most and lives can be saved. Unlike traditional insurance policies, intended to return the insured back into the position they were in prior to an insured event, parametric insurance covers the probability of a predefined event happening instead of indemnifying actual loss incurred.”

Without parametric insurance, vulnerable nations such as Madagascar would be unable to respond swiftly and effectively, to help build back better. ARC Ltd. already has 35 African Union members that have access to its ARC Ltd. risk transfer services.

There are ongoing efforts to ensure that more countries sign up to support this mechanism and endorse it as Africa’s solution to the growing threats of natural disasters.

Ends

For more information about The African Risk Capacity Limited (ARC Ltd), or to arrange an interview, please 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.

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.

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.