The African Risk Capacity (ARC), which provides parametric disaster insurance products for countries in Africa, has signed a memorandum of understanding with the Southern Africa Development Community (SADC) Secretariat to further enhance its members disaster resilience and risk financing.
With the SADC region of Africa being particularly prone to climate and natural disaster risks including droughts, floods, tropical cyclones, storms and epidemics, the partnership aims to increase resilience through the uptake of innovative frameworks for disaster risk management and financing.
ARC believes that by combining early warning, contingency planning and risk financing through rapid paying parametric insurance resilience can be boosted, adaptation capacity can be raised and losses can ultimately be reduced.
“The partnership will enable us to systematically work with SADC to better profile disaster risks facing the region, strengthen existing response capacities and contingency plans, and offer sovereign insurance options to enable rapid action when natural catastrophes occur,” explained ASG Mohamed Beavogui, the Director-General of African Risk Capacity.
Executive Secretary, Southern Africa Development Community (SADC), Dr. Stergomena L. Tax, added, “We can now deliberately work together on issues of common interests and strengthening a comprehensive and integrated regional approach towards Disaster Risk Reduction and mitigation of all forms of hardships that occur as a result of increasing climate variability resulting in increasing incidences and severity of floods, droughts and cyclones in the SADC Region.”
The partnership will see the two organisations working to build on the SADC’s existing response mechanism against drought and other climate risks, delivering a technical action plan that will include integrating disaster risk financing into disaster risk policy and frameworks, and creating regional disaster risk financing and insurance capacities.
The Southern African Development Community (SADC) is a Regional Economic Community (REC) composed of 16 Member States. The region’s population and economic growth is largely supported by industries such as Mining, Agriculture, Forestry, Tourism and Wildlife as well as Service Industries, all of which are prone to the impacts of climate related disasters.
As a result, putting in place frameworks to support disaster resilience and risk transfer is expected to boost the regions economy and ability to bounce back from climate related catastrophe.
Parametric insurance will clearly play a key role, backed by the efficiency of global reinsurance markets.
Since 2014, ARC member states have signed 32 policies with US $73 million paid in premiums and providing cumulative insurance coverage of US $553 million, all on a parametric trigger basis.
This is only possible through the pooling of the risks and their transfer to the global reinsurance markets and as the risk pool grows, through initiatives such as this work with the SADC the efficiencies of risk capital and parametric triggers can increasingly be realised.
To date, ARC has protected roughly 55 million people across the member states accessing its parametric insurance tools, while also helping them to become more resilient though early-warnings and resilience planning.