Supporting the African Risk Capacity

As a provider of reinsurance capacity and expertise, in 2014 we helped to launch the African Risk Capacity (ARC), the continent’s first parametric natural disaster insurance pool. It offers governments insurance protection against drought, which poses a recurring threat in large parts of Africa and puts the livelihoods of millions of citizens at risk.

Through ARC’s in-house risk modelling platform, Africa RiskView, the participating governments can assess the drought risk they face and decide how much of it they want to insure at what loss threshold. Based on satellite rainfall data, payouts are then made automatically to the governments when the agreed drought thresholds are exceeded. To take part in the scheme, countries need to have contingency plans in place that show how payouts will be used to support the affected population.

In its initial 2014/2015 season, ARC offered drought insurance for a total of USD 129 million to four governments: Kenya, Mauritania, Niger and Senegal. Less than a year into the programme, the latter three received payouts totalling more than USD 26 million, following a severe drought in the Sahel. In the 2015/16 season, further countries joined the risk pool, thereby increasing total coverage.