The African Risk Capacity Insurance Company presented a cheque for $2,126,803 to the Republic of Madagascar to cover anticipated livelihood losses for 600,000 vulnerable Malagasy people due to drought-related crop failures in the recent farming season. The funds will help farmers in the country's hard-hit "Great South" region avoid resorting to consuming their seeds, selling farm tools or migrating in search of work and food.
The pay-out is the result of drought insurance taken out by Madagascar under the Africa Disaster Risk Financing Programme (ADRiFi), a partnership involving the African Development Bank that strengthens Madagascar's resilience by supporting its participation in ARC's sovereign risk transfer mechanism. Through ADRiFi, the Bank financed 100% of the 2019/2020 insurance premium for sovereign drought risk transfer for Madagascar.
In a press release issued 3 July 2020, the Government of Madagascar acknowledged the payment and the value of the funds in providing assistance to fragile communities in the country.
The Indian Ocean island nation faces significant disaster risk from increasingly variable climate patterns, including cyclones, flooding and drought, which exacerbate food insecurity and strain public finances and GDP growth. According to Bank data, natural disasters in Madagascar caused an estimated $420 million in damages in 2017.
"Our purpose in working with Member States to provide disaster risk insurance is targeted at promoting resilience and providing financial protection to the vulnerable population when perils occur," said Lesley Ndlovu, the CEO of ARC Insurance Limited.
"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," he added.
Agriculture is a critical economic sector in Madagascar, contributing about 25% of the country's GDP and employing 78% of the economically active population. The current pay-out will be invested in the Government response to the drought emergency and food insecurity to benefit smallholder farmers and vulnerable people.
"The insurance policy pay-out is timely, with Madagascar also facing the challenges of dealing with the current COVID-19 pandemic. It demonstrates that risk transfer programmes can help countries manage the risks of climate-related disaster and release pressure on public finances when multiple crises occur," said Dr. Jennifer Blanke, Vice President for Agriculture, Human and Social Development at African Development Bank.
ARC and the Bank signed an agreement in March 2017 to support African states to manage disasters and increase resilience to climate related shocks. ARC, with support from the United Kingdom, Germany, Sweden, Switzerland, Canada, France, the United States and the Rockefeller Foundation assists AU Member States in reducing the risk of loss and damage caused by extreme weather events by providing sovereign disaster risk insurance. Since 2014, ARC has protected 54 million vulnerable people by paying $83 million in premiums to provide insurance coverage. ARC is also using its expertise to help tackle some of the other most significant threats faced by the continent, including outbreaks and epidemics.
Contact:
Olufemi Terry |Communication and External Relations Department | African Development Bank | email: o.terry@afdb.org
