The African Risk Capacity (ARC), the provider of parametric sovereign disaster risk insurance and other support to African nations, has launched a new insurance product designed to cover disease outbreaks and epidemics.
The outbreak and epidemic parametric insurance product has been designed to deliver rapid payouts and targeted funds for detected outbreaks, the type of intervention that studies have demonstrated can contain an outbreak and slow or prevent its spread.
Readers will be familiar with the concept, having seen the World Bank issuing a parametric catastrophe bond designed to cover pandemic risks as part of the reinsurance backing for its Pandemic Emergency Financing Facility (PEF).
By mobilising capital rapidly as soon as an outbreak or epidemic is spotted, the African government beneficiaries of the parametric insurance coverage can benefit from relief funding far in advance of when traditional sources of aid tend to be distributed.
Catching an outbreak in its early stages also means medical intervention can have significantly more effect, so the use of a parametric trigger that pays out when an outbreak is recorded that meets the triggers parameters, means funding liquidity for the governments to help them prevent its spread and worsening.
The African Risk Capacity (ARC) has already built parametric insurance coverage for drought and is working on cyclone and flood products as well. The insurer uses the global reinsurance markets to help share its risk, reduce exposures and make its products as efficient as possible. African Finance Ministers called on ARC to develop a similar product to cope with disease challenges.
The product was launched at a technical workshop held by ARC alongside the Africa Centres for Disease Control and Prevention (Africa CDC). The workshop helped to determine which specific disease pathogens or pathogen families should be covered by the pilot insurance programmes.
The initial pilot launch for the outbreak and epidemic insurance product will focus on diseases with severe impacts and with which authorities are least familiar, due to the infrequency of outbreaks. These diseases include Ebola, meningitis, yellow fever, dengue fever, SARS, MERS, Marburg virus, and smallpox.
Robert Kwame Agyarko, ARC’s lead advisor for Outbreak & Epidemic, commented; “This launch marks an important step in a programme that has the potential to provide our continent with meaningful support and progress in controlling and minimizing the damage done by disease outbreaks. We cannot afford to wait until after disaster strikes – Africa must prepare, and we must invest in saving lives.
“Africa is under the threat of infectious diseases like Ebola and Marburg that can take hold and spread viciously, endangering lives and seriously harming security, the economy and public order,” he continued. “Had Ebola been identified and the response begun two months earlier, the total number of deaths could have been reduced by 80%. We can never allow that to happen again. Together with all our partners, we will be able to establish the effective and sustainable solutions Africa needs.”
The pilot will begin with Guinea and Uganda, locations selected for their regional balance and previous experience with epidemic-prone diseases.
ARC will work with Metabiota and Health Systems Consult Limited (HSCL) to design the parametric insurance pilot with the Ministries of Health of Guinea and Uganda.
With the launch of this product ARC will expand its risk pool adding a diversifying, non-natural peril. It will result in the need for a different kind of reinsurance market support, as the exposure profile of the risk pool changes, and overtime it will result in an enlargement to the ARC reinsurance program as well.