African Risk Capacity hopes to expand to 12 countries in year-two

The African Risk Capacity (ARC), the first catastrophe insurance pool set up to provide cover to African nations, is set to more than double the number of countries that benefit from its products in its second year, with 12 likely to sign up, according to its director general.

Speaking to Reuters, ARC director general Richard Wilcox said that the success experienced by the ARC so far has encouraged 12 countries to explore signing up for policies for the second year of its operation.

The ARC launched in May 2014 with a mandate to help member states become more resilient to extreme weather catastrophes and to protect food insecure populations in Africa. At launch, the ARC had five policy holding members, Kenya, Mauritania, Mozambique, Niger and Senegal.

Initially, the ARC issued policies to cover drought to each country, with each one tailored to meet the specific needs of the covered African nation.

Earlier this month we wrote that the ARC had made its first payouts under the policies, with Senegal, Niger and Mauritania all awarded funds resulting from drought experienced during 2014. The three regions paid a combined premium of approximately $17 million, and Senegal received the highest payout of more than $16 million.

Also of note, the ARC looks set to benefit from its use of international reinsurance markets in its first year, on a gross premium to loss basis. Wilcox told Reuters that the ARC received $2m more in premiums than it paid out, due to making use of reinsurance. With reinsurance capital cheaper than perhaps ever before, the ARC was able to ensure it was only liable for the first $15m of payouts.

ARC has also been approached by members to explore the creation of an Ebola insurance cover, as we wrote last week.

It’s encouraging to see ARC attracting more interest from African nations which can clearly benefit from the insurance protection it provides. The first year for the ARC looks set to be very successful.

Also read:

– ARC explores Ebola cover, World Bank talks pandemic cat bonds.

– African Risk Capacity in first payout of $25m to three countries.

– Climate change catastrophe bonds for Africa to be launched by ARC.