Floodbase, ARC & Global Parametrics team up on African flood insurance programs

Insurtech Floodbase, which acts as a data provider and reporting agent for parametric risk transfer arrangements, is partnering with African Risk Capacity Limited (ARC Ltd.) and CelsiusPro-owned Global Parametrics, to deliver parametric flood insurance programs in Mozambique and Malawi.

Last October it was announced that African Risk Capacity Limited (ARC Ltd.) had entered into a partnership with Floodbase, that would see the pair working to develop, distribute, and scale parametric flood insurance products for Africa.

That partnership is already bearing fruit and with the addition of expertise from Global Parametrics, as well as a grant awarded to Floodbase through the U.S. Agency for International Development (USAID) as part of the President’s Emergency Plan for Adaptation and Resilience (PREPARE), these first African parametric flood insurance programs are set to launch.

Floodbase highlighted that insurers have historically struggled to create economically viable flood insurance products for buyers on the African continent.

“Modeling flood risk across large, agricultural regions is challenging to do accurately, and claims management is operationally difficult and prohibitively expensive for traditional indemnity products. Both factors have limited the availability of flood insurance in emerging economies. And yet with devastating events like Cyclone Idai responsible for $700m in economic loss, it’s clear that effective climate adaptation requires new solutions that bring together innovative technology, local expertise, and a new approach to transferring and reducing risk,” Floodbase explained.

An analysis found that had Floodbase’s parametric insurance program been in place when Cyclone Idai occurred in 2019, over 10,000 farmers in the central regions of Mozambique could have received a payout triggered under the policies within days of the event.

Floodbase becomes one of the first grant recipients under the Adaptation Finance Window of the PREPARE initiative, launched through the USAID Climate Finance for Development Accelerator.

With the help of the grant, Floodbase aims to help smallholder farmers in Malawi and Mozambique with parametric flood insurance to provide financial protection for previously uninsurable risks.

Floodbase will design risk transfer programs for Mozambique and Malawi, while Global Parametrics and ARC Ltd. will support the project with underwriting, capacity building, and deployment of their risk capacity.

The parametric flood insurance programs will be underwritten and monitored using satellite observations and machine learning technology, allowing for rapid payouts that can be made in days after the contracts are triggered.

The project also hopes to demonstrate the scalability of the solution and the sustainability of parametric flood insurance in emerging markets.

“Our collaboration with Global Parametrics, ARC Ltd., and USAID is an excellent blueprint for bringing new parametric flood products to market; USAID funding the development of the programs derisks the venture, both risk-transfer partners will ensure the programs are financially sustainable, and ARC Ltd. brings a wealth of local distribution expertise to ensure farmers can access policies. Both Floodbase and our partners are dedicated to closing the insurance gap in Africa and scaling our approach as broadly as possible,” explained Bessie Schwarz, Floodbase CEO.

“Parametric risk transfer and risk capacity deployment are pivotal for bridging the protection gap, especially as the demand for pre-arranged financing for climate disasters intensifies. In 2023, Global Parametrics, through its Natural Disaster Fund, strengthened climate resilience for 31 million poor and vulnerable people, deploying capacity to underwrite natural disaster risks in 70 countries eligible for official development assistance. We are grateful for the collaboration with Floodbase and ARC Ltd. to strengthen the resilience of communities in Malawi and Mozambique,” added Mark Rueegg, CEO of the CelsiusPro Group.

“We’re excited to partner with Floodbase to complement our portfolio of innovative parametric solutions to support flood-vulnerable communities in Malawi and Mozambique. We have deep expertise distributing insurance products across Africa, which will help ensure the largest possible participation in these Floodbase parametric programs,” Lesley Ndlovu, ARC Ltd. CEO also said.

Floodbase recently announced an enhancement to its parametric flood trigger data offering, integrating 24/7, all-weather synthetic aperture radar (SAR) data into its solution, to enhance the coverage and granularity so as to make parametric flood insurance and risk transfer triggers more accurate.