The Government of the Federal Republic of Germany today announced, on the margins of the ongoing United Nations 2021 United Nations Climate Change Conference (COP26), the sum of €18million to subsidize the cost of disaster risk insurance for qualifying African Risk Capacity (ARC) Group Member States. In her statement, the Parliamentary State Secretary to the Federal Ministry for Economic Cooperation and Development (BMZ), Dr. Maria Flachsbarth, stated that 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. 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 ARC replaces these outdated approaches by offering governments and humanitarian actors the opportunity to plan and purchase insurance that can provide fast payouts, quickly reaching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.
Christian Krämer, Member of the Management Committee at KfW Development Bank: “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.”
Ibrahima Cheikh Diong, United Nations Assistant Secretary-General / Director-General of the African Risk Capacity Group: “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.”
Christina Bennett, CEO, Start Network: “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.”
(ARC) Group consists of ARC Agency and ARC Insurance Company Limited (ARC Ltd). ARC Agency was established in 2012 as a Specialized Agency of the African Union to help the Member States improve their capacities to better plan, prepare and respond to weather-related disasters. ARC Ltd is a mutual insurance facility providing risk transfer services to the Member States through risk pooling and access to reinsurance markets.
ARC was established on the principle that investing in preparedness and early warning through an innovative financing approach is highly cost-effective and can save upward of four dollars for every dollar invested ex-ante.
With the support of the United Kingdom, Germany, Sweden, Switzerland, Canada, France, the European Union, the Rockefeller Foundation, and the United States, ARC assists the AU Member States in reducing the risk of loss and damage caused by extreme weather events affecting Africa’s populations by providing, through sovereign disaster risk insurance, targeted responses to natural disasters in a more timely, cost-effective, objective, and transparent manner. ARC is now using its expertise to help tackle some of the other most significant threats faced by the continent, including floods and outbreaks & epidemics. Since 2014, 62 policies have been signed by the Member States for cumulative insurance coverage of US$720 million for the protection of 72 million vulnerable populations in participating countries.
KfW is one of the world’s leading promotional banks. KfW has been committed to improving economic, social and environmental living conditions across the globe on behalf of the Federal Republic of Germany and the federal states since 1948.
To do this, it provided funds totalling EUR 135.3 billion in 2020 alone. Of this amount, 33% was used for climate and environmental protection. Its financing and promotional services are aligned with the United Nations’ Agenda 2030 and contribute to the achievement of the 17 Sustainable Development Goals (SDGs).