African Risk Capacity makes over $170m of parametric payouts in first 10 years

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The African Risk Capacity (ARC), a provider of parametric disaster insurance products to countries and other entities in Africa, has now paid out more than $170 million in claims to support its members in the aftermath of natural disasters.

Launched in 2014 with a mandate from the African Union Heads of States to provide insurance coverage and risk transfer solutions to African countries, ARC is celebrating its 10th anniversary.

Since its inception, the provider of parametric insurance has paid out over $170 million in claims to support vulnerable communities.

ARC has evolved over the years, from initially being a provider of drought insurance to now offering parametric solutions for both crops and livestock, and, at the same time, has diversified its offering to include floods, tropical cyclones, and also health-related exposures such as outbreaks and epidemics.

Alongside its work with governments, ARC now also collaborates to provide insurance protection to humanitarian agencies such as the World Food Programme, Start Network, and the UN High Commission for Refugees. In addition, the company works with the private sector through reinsurance as it looks to protect the income of small to medium-scale farmers, who are among the most vulnerable to the impacts of climate change.

Lesley Ndlovu, CEO of ARC, commented, “We started out with the premise that partnering governments would be the most effective way to progress on this disaster risk management and financing journey, and it proved correct. We have successfully built and nurtured these relationships and been able to sign up 39 member states across Africa.”

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“I am particularly pleased with the over US$170 million we have paid in claims. Behind these figures are communities across Africa that benefited after they were struck by natural disasters. We are also pleased by the number of countries that now utilise insurance as part of their disaster risk financing matrix. And while it’s too early to say that the battle is won, we have made significant progress in shifting from reactive to more proactive disaster risk management and financing approaches over the past decade,” added Ndlovu.

Just last month, the company entered into a landmark $11.7 million partnership with the U.S. Government, designed to help expand access to parametric insurance and increase the size of its risk pool.

“Additionally, the increasing severity and frequency of natural disasters is a critical focus for us. This phenomenon highlights the importance of having multiple financial instruments to complement the insurance offering for which we are known,” said Ndlovu.

ARC confirms that its goal is to expand its coverage across all 55 African Union countries, with Ndlovu warning that the latest data shows that climate change threatens the economic livelihoods and lives of an estimated 700 million people.

“Our mandate, mission and vision as an organisation is to provide coverage to all who need it. This is what motivates us every day. What started as a concept has evolved in 10 years to become a proven and trusted solution for the continent. We will keep scaling up for even more impact,” said Ndlovu.

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