Current resource allocation for mitigating climate shocks is inefficient, according to Mr Luis Alton, senior financial-sector specialist at the World Bank's Disaster Risk Financing and Insurance Programme.
“While many countries have multiple instruments to help them with this, they’re not joined up strategically, which can lead to inefficiencies,” he said. “For example, where insurance should be used for extreme events, it is used to cover less extreme events instead.”
He was speaking at a retreat in London of members of The African Risk Capacity Limited (ARC Ltd), a mutual insurance facility. The retreat brought together ARC Ltd staff, members, partners, and other stakeholders to discuss challenges and solutions.
UNHCR Climate Insurance lead and strategic risk advisor Ms Mojisola Terry, echoing this, said, “We need to disrupt the way institutions respond to, utilise resources, and fund their climate interventions.”
Explaining that it should no longer be a debate, she added, “We want to demonstrate that investing in risk mitigation will lead to more resilient communities, better assistance, better targeting, and hopefully address the humanitarian landscape.”
Ms Terry noted that climate resilience must be looked at holistically. “That’s why the partnership between the UNHCR and ARC Ltd to increase protection to those who need it the most through the Replica programme is logical and timely,” she explained. The Replica programme extends ARC Ltd’s parametric insurance to humanitarian organisations. Through the programme, humanitarian organisations can take out insurance on behalf of a country against climate-induced threats and disease outbreaks.
The UNHCR took out a modest Replica premium for drought insurance in the central region of Malawi for 2024. In April, the release of funds was triggered, resulting in a payout that assisted 20,000 people — 60% of Malawi’s refugee community.
Continuous improvement for climate resilience
Ms Terry pointed out that no perfect climate resilience model exists, only opportunities to improve. She said, “The UNHCR is committed to continuing to work with ARC Ltd, as well as other partners, to make sure we have access to the best possible data so we can plan and prepare better in the event of disasters.”
Mr Doshanie Kadokera, Malawi Government coordinator, said that there is a need for ownership among governments when it comes to building climate resilience in African countries. “Malawi’s risk management strategies and policies with ARC Ltd and partners like the UNHCR, reflect our commitment to protecting our citizens and their livelihoods.”
ARC’s priorities
Mr Lesley Ndlovu, CEO of ARC Ltd, said, “Looking ahead, it’s clear that we still have a lot of work to do. Our focus remains on three priorities: expanding coverage to all 55 African Union countries, managing capital funding and reinsurance to maintain an A- credit rating, and strengthening its team and processes for greater efficiency.”
Since its inception in 2014, ARC Ltd has paid out $229.8m in claims, provided $1.2bn insurance coverage, and protected 30m Africans per year.
ARC Ltd is a financial affiliate of the African Risk Capacity (ARC) Group, a specialised agency of the African Union (AU), an initiative designed to improve current responses to climate-related food security emergencies. ARC Ltd’s members have included Kenya, Mauritania, Niger, Senegal, Mali, Malawi, the Gambia, Burkina Faso, Chad, Zimbabwe, Togo, Madagascar, and Zambia.