The African Risk Capacity (ARC), a parametric sovereign disaster risk insurer for African nations, has paid the government of Madagascar $2.3 million after its parametric drought insurance policy was triggered in the last growing season.
Madagascar has benefited from ARC parametric insurance coverage thanks to its joining the Africa Disaster Risk Financing (ADRiFi) Programme and with the premium support of the African Development Bank.
The contribution paid for drought insurance to cover Madagascar’s government, so that any payout could help its farming community recover from drought conditions.
The 2019/20 agricultural season has seen sufficiently severe drought conditions for a payout to come due under the parametric disaster insurance policy, resulting in the $2.3 million payout.
It’s hoped that the payout could assist the lives and livelihoods of as many as 600,000 vulnerable population affected by the drought.
“The drought insurance of African Risk Capacity is one of the sustainable solutions to strengthen the efforts of the Government and partners in the Southern region of Madagascar. It demonstrates the mutual assistance between friendly African countries to respond efficiently to natural disasters, particularly drought,” Finance Minister Richard Randriamandrato commented.
UN-ASG Mohamed Beavogui, the Director-General of African Risk Capacity added, “The payout made by ARC to support the drought-affected population in the Great South” region was made possible thanks to the leadership and commitment of the Government of Madagascar to protect its people. We also thank the AfDB for their laudable support through the ADRiFi programme. This is a vivid testimony that collaboration between African governments and development partners, both within and outside the region, using market approaches can go a long way in saving developmental gains on the continent.
“Our purpose in working with Member States to provide disaster risk insurance is targeted at promoting resilience and providing financial protection to the vulnerable population when perils occur”, remarked Lesley Ndlovu, the CEO of ARC Insurance Limited. “We are glad that this payout will assist the Government in quickly supporting its affected population to rebuild and recover from the effects of the drought and prevent them from resorting to negative coping mechanisms.”
“The insurance policy payout is timely, with Madagascar also facing the challenges of dealing with the current COVID-19 pandemic. It demonstrates that risk transfer programmes can help countries manage the risks of climate-related disaster and release pressure on public finances when multiple crises occur,” further explained Dr. Jennifer Blanke, Vice President for Agriculture, Human and Social Development at African Development Bank.
Since 2014, ARC has provided 45 insurance contracts to its member states, representing USD $83 million in premiums paid for a total insurance coverage of USD $602 million, protecting some 54 million vulnerable people in participating countries against drought and other perils on a parametric trigger basis.