African Risk Capacity and AfDB sign MOU to enable African countries to respond to extreme weather events and natural disasters

27/05/2016
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The African Risk Capacity has taken major steps towards its goal of providing US $2 billion worth of annual climate disaster coverage to Africa’s most vulnerable populations.
ARC signed a Letter of Intent and a Memorandum of Understanding with the African Development Bank (AfDB) and the Conférence Inter-Africaine des Marchés d’Assurance (CIMA), respectively, on Wednesday, May 25 after a high-level panel on Climate Disaster Risk Financing at the AfDB’s Annual Meetings in Lusaka, Zambia.   
The Letter of Intent between ARC and the AfDB marked an announcement of their intention to collaborate in the areas of planning, preparation and response to extreme weather events and natural disasters for the benefit of the Regional Member Countries of the AfDB (RMCs).
The collaboration is expected to play a pivotal role in protecting investments for economic growth especially in key economic areas vulnerable to weather shocks such as agriculture. The Letter of Intent will support the introduction and mainstreaming of disaster risk financing into national fiscal policy in Member States.
The MoU signed by ARC and CIMA, the regulatory and insurance body for 14 countries in West and Central Africa, reflects an agreement to cooperate on a number of areas including:

  • Training by CIMA of officials and technicians from ARC Member States on index-based insurance products for sovereign governments;
  • Establishing working groups to study and implement strategies related to weather-index based risk coverage; and
  • Promoting weather-index based insurance products for access to traditional insurers.

The MoU marks a significant step in the institutional development of ARC and its collaboration with a regional technical institution like CIMA, which plays a crucial role in building risk management and insurance expertise within its Member States.

ARC was established by Treaty in 2012 as a Specialised Agency of the African Union (AU). ARC was set up to help Member States improve their capacities to better plan, prepare and respond to extreme weather events and natural disasters, therefore protecting the food security of their vulnerable populations.

ARC is made up of two entities representing a true private-public partnership: the ARC Agency and its financial affiliate, the ARC Insurance Company Limited (ARC Ltd), which is a mutual insurance company owned by its members, the African governments participating in the risk pool and capital contributors - the UK and German governments.

By linking early warning systems with contingency planning and supported by modern financial mechanisms, ARC enables governments to provide targeted responses to disasters in a more timely, cost-effective, objective and transparent manner, thereby reducing response costs and loss of livelihoods.

Mohamed Beavogui, Director General of ARC Agency, said:
“This signing between ARC and AfDB reinforces and formalizes an already strong partnership between both institutions and demonstrates the foresight and leadership of the Bank in coordinating our efforts towards addressing the needs of our Member States.”
Dr Ngozi Okonjo Iweala, Chair of ARC Agency’s Governing Board, said: “I am proud of ARC as an institution. This organization I believe truly represents how African states are finding African-led solutions to all too familiar crises visited upon us by extreme weather conditions, climate change and other man-made factors.”
The AfDB and CIMA partnerships are expected to help drive ARC towards its goal of indirectly insuring 150 million people across 30 countries on the continent by 2020.
So far seven countries – Niger, Senegal, The Gambia, Mali, Malawi, Mauritania and Kenya – have purchased insurance from ARC Ltd. ARC is also launching a tropical cyclone insurance product this year and a flood insurance product in 2017 as part of its effort to increase insurance coverage across Africa. 
The signings of the Letter of Intent and the MoU followed a panel on ‘Climate and Disaster Risk Financing: Innovation for the Continent’ at the AFDB’s Annual Meeting in Lusaka, Zambia. Several Ministers of Finance and Economy from across the continent and their partners participated including:

  • Henry K. Rotich, Cabinet Secretary for the National Treasury, Republic of Kenya
  • El Moctar Ould Diay, Minister of Economy and Finance, Islamic Republic of Mauritania
  • Adama Koné, Minister of Finance and Economy, Republic of Côte d’Ivoire
  • Thomas Silberhorn, Parliamentary State Secretary to the Federal Minister for Economic Cooperation and Development, Federal Republic of Germany
  • Lars Thunell, Chair of the African Risk Capacity Insurance Company Limited (ARC Ltd) Board