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Drought-stricken Mali receives first-ever African Risk Capacity (ARC) Limited climate risk insurance pay-out

By APO Group
07 March 2022   |   6:00 pm
Download logoRising insecurity, droughts and COVID-19 plunge Mali into food crisis; WFP to use US$7.1m ARC Limited Replica pay-out for food assistance Over 204,000 vulnerable people in drought-affected regions of Mali will benefit from a US$7.1 million climate risk insurance pay-out by African Risk Capacity (ARC) Limited to the United Nations World Food Programme (WFP).…

African Risk Capacity (ARC)
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Rising insecurity, droughts and COVID-19 plunge Mali into food crisis; WFP to use US$7.1m ARC Limited Replica pay-out for food assistance

Over 204,000 vulnerable people in drought-affected regions of Mali will benefit from a US$7.1 million climate risk insurance pay-out by African Risk Capacity (ARC) Limited to the United Nations World Food Programme (WFP).

The ARC Replica pay-out is the first of its kind in Mali, aimed at providing emergency and resilience-building support to populations vulnerable to the impacts of climate-change-induced disasters.

In 2021, Mali experienced the most severe lack of rains in five years caused by periodic dry spells and low rainfall, putting 1.9 million people across the country at risk of severe food insecurity – mostly in the regions of Kayes, Gao, Mopti, Segou, and Timbuktu.

In the case of Mali, however, the impacts of drought have been particularly exacerbated by 10 years of conflict and COVID-19.

As an ARC-Replica technical partner, the WFP has been subscribing to the climate insurance policy in Mali since 2017 to finance early emergency response. In 2021, WFP’s insurance premium was funded by the United States Agency for International Development (USAID) and the Government of Germany.

Speed is of the essence and the ARC Replica programme requires of governments and partners, such as the WFP, to develop a contingency plan which sets out at a very high level how the government would use any insurance pay-out received from ARC Limited, explains Lesley Ndlovu, CEO ARC Limited.

“Having a plan increases dramatically the speed of execution because at a point the government received the funding, it already has a plan on how to disburse this,” he says.

For every US$1 ARC Limited pays in insurance claims, there is also a US$4 impact on the economy, so the insurance claims paid out by ARC have a very profound impact in addressing the economic concerns that the most vulnerable citizens face.

By its very nature ARC Limited’s insurance mechanism supports the implementation of a national disaster risk management policy and strategy, explains Ndlovu. “We work with member states to provide disaster risk insurance to promote resilience and provide financial protection the vulnerable population when perils, such as the Mali drought, occur.”

To that end, the Government of Mali and its Replica partner, the WFP, have established a joint response plan which will be implemented in a coordinated manner to manage and prevent food insecurity and malnutrition caused by the drought.

“Collaboration between ARC, our Replica Partners and Governments is a good example of how private and public sector can come together to solve the pressing problems the continent faces in dealing with climate-change-induced events, says Malvern Chirume, ARC Limited Chief Underwriting Officer.

“These solutions require a multi-faceted approach and as a parametric insurer, our role extends beyond simply getting money into the hands of those institutions that can help vulnerable people affected by these events. Our role as ARC Limited includes building resilience and embedding a proactive approach to disaster risk management,” he says.

“This pay-out comes at a vital time – helping families adapt to most severe impacts of climate change and preserve their livelihoods,” says Sally Haydock, WFP’s Country Director and Representative.

“The impact of poor rains is clearly visible in affected communities and could prove devastating for many families. Cereal production has decreased, and pasture and water for livestock has shrunk, forcing people to sell off their livestock,” she says.

With this climate insurance payment, WFP will provide early food assistance through cash transfers to 161,000 women, men and children affected by climate shocks. Over 20,000 children aged from 6 to 23 months, and pregnant women and breastfeeding mothers will receive nutritional support and services.

To reinforce communities’ resilience to climate shocks, 23,000 people will benefit from community asset building programmes such as pastoral wells, water towers and fishponds that will help diversify their production and livelihoods and reduce the impact of future rains deficiencies.

“ARC Replica is a valuable programme that complements and supports the efforts of the Malian Government in the fight against food insecurity and malnutrition. The government strategy is to provide half rations to populations in food crisis situations to contribute to national solidarity. Our common interest is to always work together to relieve the populations affected by drought and strengthen their resilience to climate shocks, with innovative solutions such as those offered by the ARC mutual insurance company,” affirmed DICKO Bassa Diane, Deputy Minister Commissioner of the Food Security Council.

Established to help governments improve their capacities to plan, prepare and respond to natural disasters caused by extreme weather events, ARC-Replica is an innovative approach to climate risk management which allows countries – like Mali – to extend their climate insurance coverage to more vulnerable people in their countries.

“We are glad that this pay-out will assist the Government in quickly supporting its affected population to rebuild and recover from the effects of the drought and prevent them from resorting to negative coping mechanisms”, Ndlovu concludes.

Distributed by APO Group on behalf of African Risk Capacity (ARC) .