The African Risk Capacity (ARC), a parametric sovereign disaster risk insurer for African nations, has begun a pilot with the help of San Francisco based Metabiota to roll-out parametric insurance cover against disease outbreaks and epidemics.
The new parametric outbreak & epidemic insurance product has been coming for some time, as ARC looks to expand its remit to cover new risks which will in turn increase the diversification within and efficiency of its sovereign risk pool.
Metabiota is a company focused on risk analytics for epidemics and it has just begun the risk modelling work for the new ARC outbreak and epidemic insurance product.
The goal is to help African Nations to better plan for and mitigate the risk of infectious disease outbreaks within their countries, providing an insurance product that will pay out rapidly should an outbreak show signs of developing, helped by the use of parametric triggers and backed by global reinsurance capacity.
The pilot phase of the program aims to deliver the risk modelling necessary to asses each nations risk, as well as the insurance triggers that can provide the best protection while being most responsive and offering advanced insight into developing epidemics.
As well as a parametric insurance product, the goal is to also offer African nations assistance with setting up contingency plans as well, making this about more than just financing the risks.
Metabiota said that the firms research demonstrates that outbreaks show distinct patterns and so can be insured with the use of parametric trigger design, while other risk profiling and contingency planning support can be set up in advance to offset the impact.
The ARC Outbreak & Epidemic program will evaluate public health risks through a “multidimensional self-assessment of the country’s ability to respond to an epidemic event, as well as putting in motion contingency plans for such an eventuality.”
Metabiota’s risk modelling will be used to help analyse pathogen-specific outbreak scenarios, to create risk profiles of pilot countries offering insight into the cost associated with the losses from and response to epidemiological events.
“Like everything ARC does, this collaboration is aimed at increasing the resilience of African states by giving them the capacity and tools to plan, prepare, and finance an early response to public health outbreaks before vulnerable lives are lost and livelihoods are ruined,” Mohamed Beavogui, ARC Director General said. “Metabiota understands risk and how it can be measured, so we believe this program marks the next frontier for how Africa, and the world, can better manage outbreaks.”
“This ARC pilot empowers African nations to develop a novel, proactive approach that will change the way outbreaks are managed, and that is one of the many reasons we are excited about this program,” added Dr. Karen Saylors, vice president of Field Research for Metabiota. “Because of our deep field surveillance expertise and our relationships on-the-ground in West and East Africa, Metabiota has an intimate understanding of the challenges and opportunities to help African nations better prepare themselves for a health crisis. We fully align with ARC’s vision to empower sovereign nations and this innovative effort supports that vision.”
Metabiota’s technology and insights will help insurers and also the reinsurance community to understand the risks ARC will then seek to transfer as part of its risk pool.
The addition of epidemic risk to the risk pool will add diversification and may actually result in added reinsurance efficiencies, as some global players may find the more diverse risk pool a more attractive underwriting proposition.
Of course the shift to include more than just natural catastrophe or weather risk in the ARC risk pool could also put off some players that would prefer the cat exposure. But the use of parametric triggers and the African focus throughout the insurance products ARC offers, should mean its reinsurance renewal remains a very attractive source of diversification for the global reinsurance and also ILS market.