ARC & Africa CDC team on parametric outbreak & epidemic insurance

The African Risk Capacity (ARC) has teamed up with the Africa Centre for Disease Control (Africa CDC) to further its work on a parametric index to support outbreak and epidemic insurance and risk transfer at the sovereign level.

ARC has been working on developing an outbreak and epidemic risk transfer offering for some time now, having launched its effort to create the first sovereign insurance cover for disease outbreaks and epidemics back in 2015 in response to the Ebola crisis that affected the region of west Africa in 2014.

Given ARC’s focus on delivering responsive, parametric and index based insurance or risk transfer triggers for its products, the work is continuing to develop a suitable index to support this new initiative.

As a result, ARC and the Africa Centre for Disease Control (Africa CDC) have signed a Partnership Agreement to collaborate on helping African Union Member States increase their preparedness and emergency response against infectious diseases, of epidemic nature.

Working with other stakeholders, the pair are to set up the “Africa Epidemic Preparedness Index” which is being created within the framework of the International Health Regulation (IHR 2005) compliance.

The Africa Epidemic Preparedness Index is designed to be able to support risk transfer triggers, with an indices against which risk transfer and insurance can be structured and payouts be disbursed.

“This Agreement is in line with our ongoing strategic and technical collaboration to provide AU Member States with an array of risk management tools, including early warning, contingency planning, and alternative financing options against infectious diseases,” explained ASG Mohamed Beavogui, the Director-General of ARC.

“The next steps will be to explore how quickly we can assist Governments to begin strengthening capacities for risk reduction and mitigation before the next outbreak. Particularly, to encourage prioritization of investments in emergency preparedness and response plans for effective recovery from public health events,” he added.

Slow and unpredictable funding was seen to exacerbate the 2014 Ebola crisis and impact the effectiveness of response.

By securing funding using insurance products featuring parametric triggers, backed by the depth of the global reinsurance market, ARC hopes to offer African nations a way to secure important risk financing that can be delivered swiftly on the emergence of an infectious disease that is epidemic in nature.

“Establishing early warning and response surveillance platforms to address all health emergencies in a timely and effective manner towards supporting public health emergency preparedness and response are pivotal to our work,”
Dr John Nkengasong, Director, Africa CDC, commented. “Our partnership with ARC will consolidate this effort and provide a good synergy to support Member States in health emergencies response in addition to promoting critical partnerships to address emerging and endemic diseases and other public health emergencies.”

The index and triggers will be key, as ensuring the payouts come in a timely manner for epidemics that are truly impactful is vital and so the index and triggers need to be carefully calibrated to the exposure.

In addition, the ARC risk pool will grow to support this new product, with all important reinsurance capacity required to support this.

As the ARC risk pool has expanded in recent years with the growth of its other parametric sovereign risk transfer products, the addition of outbreak and epidemic coverage will also add some diversification to the risk pool which could also generate reinsurance efficiencies for the facility.