ARC launches parametric epidemic cover with Munich Re as lead reinsurer

The African Risk Capacity (ARC), a provider of parametric disaster insurance products, has launched its first epidemic risk transfer product, with the parametric insurance backed by Munich Re as the lead reinsurance company and initially covering Senegal.

The parametric insurance product will cover Senegal against high-impact epidemic risks and is designed to deliver a source of rapid funding to support efforts to contain high-impact infectious disease outbreaks, while also complementing the efforts of the Africa Centres for Disease Control and Prevention (Africa CDC).

The parametric epidemic insurance can cover African Union (AU) member states for three selected pathogens responsible for Ebola virus disease, Marburg virus disease, and meningitis.

Senegal will be the first African country to benefit from this innovative parametric risk transfer against disease outbreaks, while other member states of the African Union (AU) will be hoped to also take up the protection.

The African Risk Capacity (ARC) has been exploring parametric pandemic and epidemic insurance products for some years now, having begun developing such concepts as long ago as 2015.

Disease outbreaks create a requirement for immediate funding and capital inflow, similar to the occurrence of a natural disaster, so the parametric trigger is a suitable way to construct an insurance or risk transfer product that can be very responsive and deliver funding quickly after pre-defined parameters related to a disease outbreak are met.

We’d also assume that the parametric epidemic insurance policies will be linked to African governments’ resilience efforts and contingency plans, in a similar way to ARC’s drought insurance product

“In our perspective of diversifying our product offering aimed at protecting the most vulnerable populations of our continent, we are today launching this new sovereign risk transfer mechanism through parametric insurance, which will allow our Member States to benefit, in addition to insurance against climate-related disasters, from coverage against epidemic risks,” explained UN Under-Secretary-General and ARC Group Director General Ibrahima Cheikh Diong.

“We are confident that these predictable funding tools coupled with operational plans will strengthen response capacities of our Member States while developing their expertise to tackle public health emergencies.”

ARC worked with Ginkgo Bioworks, a specialist in epidemiological expertise and epidemic risk estimation services, while the insurance product was made available through its ARC Ltd. subsidiary of ARC

Global reinsurance giant Munich Re was selected as the lead reinsurer for the new epidemic parametric insurance product and the company has a long-standing reputation for underwriting epidemic risks as well as parametric insurance solutions.

Aon provided broking services through its Reinsurance Solutions unit, while the insurance premium for the product has been subsidised by the Swiss Agency for Development and Cooperation (SDC).

In addition, the Appleby Bermuda insurance team advised ARC Ltd. on the parametric insurance product, setting up the segregated account structure for ARC Ltd. to create the legal and operational framework for the program.