World Bank assists on Mozambique cyclone reinsurance program

The World Bank has assisted in the structuring of a cyclone reinsurance arrangement to protect Mozambique’s state insurer against the impacts of major storms, working alongside parametric insurtech PULA and managing general agent Africa Specialty Risks (ASR).

The US $35 million parametric reinsurance cover will provide a pay-out to the state insurer when certain triggers are met during a cyclone event, providing resilience to the Mozambique economy against the destructive effects of these storms.

Mozambique is considered the most disaster prone of African nations and has been impacted by a number of major cyclones in recent years, including this years cyclone Freddy that had triggered a small payout from the parametric African Risk Capacity (ARC) policy the country has.

This new parametric reinsurance arrangement is designed to help the country’s state disaster insurer have liquidity to pay claims after a major cyclone event, so will be a complementary risk transfer capacity source that flows differently to ARC’s government focused coverage when disaster strikes.

The Mozambique Government, through its National Institute of Disaster Management (INGD), has purchased the cyclone reinsurance, with Africa Specialty Risks the lead reinsurer.

The parametric wind speed and rainfall cover was structured by PULA in collaboration with the World Bank.

The US $35 million of cover will be made available based on objective measurement of weather variables, modelled to map to economic losses, with a pay-out due to the state insurer when certain trigger parameters are met.

CelsiusPro AG, the Swiss headquartered weather index insurance and parametric risk transfer specialist, was also integral to this parametric arrangement getting completed, acting as the calculation agent, modelling the risk and working on product design, while also winning an original tender with the World Bank for this work.

Antonio Jose Beleza, Deputy Director of the National Emergency Operations Center at INGD, commented on the news, “The cyclone program will provide crucial funding and stability to the Mozambique people and economy. The program will help build resilience in the economy, and highlights the importance of building risk mitigation instruments outside of the standard disaster risk insurance specifically designed to meet the increasing cyclone risk to Mozambique.”

Dr Raveem Ismail, Head of Parametric Underwriting, Africa Specialty Risks, added, “This collaboration brings together the expertise of multiple organisations to provide a comprehensive solution for cyclone risk in Mozambique. We are confident that this program will make a real impact in reducing the economic impact of cyclones on the communities and businesses in the region.

“This is an important policy for Mozambique, one which has been designed in Africa, to meet the growing need for cyclone insurance, and is an example of what is possible for insurance products across the continent.”

Thomas Njeru, CEO, PULA, also said, “We are pleased to have joined forces with the Institute of Disaster Risk Management of Mozambique, Africa Specialty Risks and the World Bank to deliver this cover to the Mozambique government. The program will help provide certainty for the most vulnerable communities in Mozambique, unlocking investment across the country with effective risk mitigation in place to protect against cyclones.”