The African Risk Capacity (ARC) will pay the Government of Côte d’Ivoire $738,835 after a deficit of rainfall during the growing season triggered the countries parametric insurance policy.
Having guaranteed a minimum pay-out of $22m for Senegal at the end of the country’s farming season in November, after drought triggered its policy, this is the second time an ARC parametric insurance policy has been triggered in quick succession.
Severe rainfall deficits is the reason this time, rather than full blown drought, which affected the 2019 growing season resulting in less successful crops.
The payout will be targeted at helping vulnerable families better endure the harsh effects of this rainfall deficit and provide sustenance through a contingency plan developed between African Risk Capacity Agency and Côte d’Ivoire Government.
ARC aims to achieve this through the provision of parametric disaster insurance products that are delivered alongside developmental plans that aim to boost resilience.
By pooling the resulting risks, ARC can then access the global reinsurance markets for capacity to support its risks, passing on reinsurance efficiencies to the participating African countries.
Cote d’Ivoire joined the ARC Ltd insurance risk pool in 2019 and this payout will be the first made by the facility to its Government.
The African Risk Capacity Insurance Limited (ARC Ltd) said it will pay $738,835 to the Government of the Republic of Côte d’Ivoire due to the severe rainfall deficits experienced in the central region of the country for the 2019 agricultural season.
“The Government of Cote d’Ivoire has been consistent in its relationship with African Risk Capacity. The expected trigger for a payout to the country will, once again, validate ARC’s proof of concept and enable the Government to timeously assist the affected population thereby significantly reducing vulnerability and promoting resilience,” commented Dolika Banda, Chief Executive Office, ARC Insurance Limited.
The risk models began to see the rainfall deficit coming as early as July 2019.
ARC’s Africa RiskView model, the software underpinning the ARC parametric insurance trigger, highlighted “irregular and insufficient rainfall” across the central region of Cote d’Ivoire
This provided an early warning that an estimated 400,000 people would be affected by the rainfall deficit by the end of the season, which ends 11 October 2019.
Mr. Assahoré Jacques, Director General of the Treasury and Public Accounting in Côte d’Ivoire and Supervisor of the ARC-CI programme, commented, “Early warning is key in the benefits we derive from our membership of African Risk Capacity. This is the first time we have received a payment from ARC Ltd and our officials and partners are ready to mobilize quickly in the affected region once the payments are made to ensure food security for the affected population.”
Since 2014, 32 ARC parametric insurance policies have been signed up to by Member States, resulting in US $73 million of premiums paid for a cumulative insurance limit of US $553 million and thought to protect 55 million vulnerable population in participating countries.
Total payouts made by ARC now amount to roughly $59 million since its launch, demonstrating the vital and quick paying source of risk capital it offers to African countries, helped by efficient reinsurance backing.