African Risk Capacity (ARC) writes first parametric flood insurance policy for Madagascar

African Risk Capacity Limited (ARC Ltd.), the financial affiliate and parametric insurance underwriting entity of the African Risk Capacity (ARC) Group, has now underwritten its first sovereign parametric flood insurance policy for the Republic of Madagascar, expanding protection options available to African nation clients.

The Republic of Madagascar officially signed the parametric flood insurance contract in January 2026, as it looked to secure responsive protection against flood-related loss and damage.

African Risk Capacity (ARC) designed the parametric flood insurance product alongside risk modelling specialist JBA Risk Management.

The product features a parametric trigger based on scientific data and advanced hydrological models, allowing for objective and transparent payouts when the predefined impact trigger thresholds are reached.

As a result, governments taking up the parametric flood insurance can benefit from rapid payout and distribution of funds, with the contracts designed to enable payouts within a timeframe of up to ten days after a confirmed flood event triggers the contract.

“This new flood product reflects the continued evolution of Africa-led climate risk management solutions. It demonstrates our collective determination to move from a reactive approach to one centred on anticipation, using innovative tools tailored to the realities of our continent,” explained Dr Jean Chrysostome Ngabitsinze, Director General of the African Risk Capacity Group.

“The floods that affected the capital at the beginning of January, leaving more than a thousand people affected, once again highlight the extent of Madagascar’s vulnerability to climate hazards. In this context, parametric insurance represents a strategic lever to strengthen our rapid response capacity, mobilize timely financing, and better protect the most exposed populations,” added Dr Ramiarison Herijantovo Aimé, Minister of Economy and Finance of the Republic of Madagascar.

ARC has been working on a parametric flood insurance solution for African nations for now more than five years, which demonstrates just how complex the peril is when it comes to constructing robust, defensible parametric triggers.

In recent years, flood risk has become much more frequently transferred using parametric contracts and ARC has been preparing for its official launch through work on pilot programs with the Red Cross.

David Maslo, CEO of ARC Ltd. commented, “Flood risk is one of the most complex hazards to model. After several years of dedicated research and investment, we are pleased to launch this parametric flood insurance solution, built on the most advanced flood risk model and tailored to the specific particularities of African countries. This is only the beginning: we will roll out this solution across our Member States and continue expanding our portfolio to address additional climate risks in line with their evolving needs.”

The first writing of a sovereign parametric flood insurance contract for an African nation expands the range of risk transfer options available to government’s in the region.

Since its launch in 2014, ARC Ltd has now issued more than 300 sovereign insurance policies, covering droughts, tropical cyclones and epidemics and paid out over US $250 million in claims against them.