Africa is the most drought-stricken continent in the world. When the rainfall season is delayed, people risk starving and leave their homes in search of food. But with a commercial insurance solution, based on weather satellite data, people can get food and livestock feed before disasters occur. And, more importantly, countries reduce the risk of food insecurity in the future.
“The emergency response from abroad usually appears after TV cameras have broadcasted the disaster. By then it’s often too late; people are starving and often have been forced to leave their homes and sell or slaughter their animals. International assistance is good, but the West has heavy pressure on their aid budgets and Africa needs to take control of its own development. One dollar spent on early intervention through African Risk Capacity (ARC) saves four and a half dollars spent after a crisis is allowed to evolve,” says Lars Thunell, chairman ARC Insurance Company board of directors and former head of the International Finance Corporation, the World Bank’s private sector arm.
We reached Lars Thunell mere days before he was set to participate in a United Nations conference on sustainable development and climate change in Dubai. The issue is important for African countries most affected by rising temperatures, while the continent itself accounts for a tiny proportion of global emissions of greenhouse gases.
Depend on rain for the crops
Sixty-five percent of Africa’s population are working with agriculture and, therefore, depend on rain for the crops. A rise in the frequency of extreme weather events driven by climate change will result in an increased risk of hunger and malnutrition among the most vulnerable populations. ARC offers a chance to reduce that risk and so far seven African countries have become members while a further 25 countries are interested, according to Lars Thunell.
“The challenge is to get politicians to understand why they should pay for insurance when they can get international emergency assistance for free. But the emergency relief is often inadequate and does not build up expertise and knowledge within countries that can reduce the risks in the future,” he explains.
Following data from weather satellites
To get the insurance required, countries must develop a plan to build their own capacity to deal with disasters. Put simply, ARC’s insurance solution uses risk analysis tools, following data from weather satellites. When severe drought is predicted, risk pool members receive a payout within 2-4 weeks of the end of the rainfall season.
In early 2015, 26 million USD was paid out, used to buy locally grown food, grain and livestock feed to more than one million people who otherwise might have gone hungry.
An insurance solution for cyclones is in the pipeline to help areas like the Comoros, Madagascar and Zanzibar. By 2020, ARC aims to reach 30 countries with nearly 1.5bn USD of coverage against drought, flood and cyclones.
Countries build up their own protection against climate change
“Our hope is to be able to help many millions of people now when we’re getting more volatility and extreme weather situations. The most important thing is that the countries build up their own protection against climate change to cope with food supply, for example, by building walls against floods and cultivating drought-resistant crops,” Lars Thunell adds.
The African Risk Capacity was established as a Specialised Agency of the African Union to help Member States improve their capacity to better plan, prepare and respond to extreme weather events and natural disasters, thereby protecting the food security of their vulnerable populations. ARC Insurance Company Limited is a combination of a climate risk analyst and a financial organisation.