Climate Insurance: German Government Declares €18m Premium Support To ARC Member States.

L-R: Ibrahima Cheikh Diong, UN-ASG / DG ARC Group; Dr. Maria Flachsbarth, Parliamentary State Secretary to the Federal Ministry for Economic Cooperation and Development (BMZ); Lesley Ndlovu, CEO, ARC Limited at the announcement of €18million to subsidize the cost of disaster risk insurance for qualifying ARC Group Member States.

The Government of the Federal Republic of Germany has announced the commitment of the sum of €18million to subsidize the cost of disaster risk insurance for qualifying African Risk Capacity (ARC) Group Member States.

The announcement came on the margins of the ongoing United Nations 2021 United Nations Climate Change Conference (COP26).

In her statement, the Parliamentary State Secretary to the Federal Ministry for Economic Cooperation and Development (BMZ), Dr. Maria Flachsbarth, said the commitment will help establish a Premium Support Facility for African governments and humanitarian agencies wishing to purchase climate related insurance.

ARC, an African Union initiative that is led by 35 AU Member States, provides insurance for droughts and tropical cyclones. Before now, the standard approach to pay for climate disasters is slow and unpredictable, using humanitarian appeals or loans arranged after a disaster strikes. ARC replaces these outdated approaches by offering governments and humanitarian actors the opportunity to plan and purchase insurance that can provide fast payouts, quickly reaching people who need support. This prevents humanitarian needs from escalating, ultimately saving lives, protecting livelihoods and assets, and safeguarding development gains.

Since 2014, 62 policies have been signed by Member States for cumulative insurance coverage of US$720 million for the protection of 72 million vulnerable populations in participating countries. Given that climate change is threatening to bring more frequent and severe extreme weather events, the Premium Support Facility will be crucial for the most vulnerable African countries.

Following the Covid-19 pandemic, many African governments have severely constrained budgets and humanitarian agencies are struggling to meet unprecedented levels of need. This new funding will subsidize insurance premiums, decreasing in future years as countries and organisations are able to take over the costs using their national budgets and long-term sustainable financing. Germany’s support will catalyze effective risk management and help protect the poorest and most vulnerable people across the continent.

“Germany has been a long-standing supporter of the African Risk Capacity. Earlier this year, in Germany we were affected by devastating floods – we have experienced ourselves the importance of preparedness and the vital role that insurance can play in recovery. We are therefore delighted to be able to extend support to African nations who have been so badly affected by the covid-19 pandemic, so that they can take steps to prepare well to face the rising challenges of climate change.” Said Christian Krämer, Member of the Management Committee at KfW Development Bank.

For his part, Ibrahima Cheikh Diong, United Nations Assistant Secretary-General / Director-General of the ARC Group said “We are extremely delighted about the consistent support of the German Government to disaster risk reduction and mitigation in our Member States. The grant is a clear testimony of the value of smart partnerships for smart disaster risk management and financing for early action. Through this assistance, we are optimistic that other partners will embrace our pitch for a Continental Premium Support Facility to help institutionalize sovereign parametric insurance culture in the region”.

“We are delighted to hear of Germany’s increase in support to ARC. By funding premiums for drought and tropical cyclone insurance in African countries, Germany is helping to ensure that vulnerable communities are better protected from the escalating risks that they face as a result of the climate crisis.” Christina Bennett, CEO, Start Network said.


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