African Risk Capacity (ARC) has launched Africa's first sovereign parametric flood insurance policy, marking a major innovation in climate risk financing and strengthening African countries' capacity to respond to the growing impacts of climate change.
Madagascar is the first country on the continent to subscribe to this new coverage, with the insurance contract officially signed in January 2026.
Until now, ARC’s solutions have primarily covered droughts, tropical cyclones and epidemics.
Parametric insurance for rapid and predictable response
The parametric flood insurance solution developed by ARC, in close collaboration with JBA Risk Management, is based on scientific data and advanced hydrological models, enabling objective and transparent payouts when predefined impact thresholds are reached. Unlike traditional insurance mechanisms, this approach allows governments to access financial resources rapidly, without waiting for lengthy post-disaster damage assessments.
The mechanism is designed to enable the disbursement of payouts within a timeframe of up to ten days following a confirmed flood event that triggers a payout, supporting timely emergency response and early recovery efforts.
The Government of Madagascar has obtained this sovereign parametric insurance policy covering flood-related losses and damages. The policy has been made possible through a long-standing partnership between the ARC and the African Development Bank, enabling the provision of coverage on concessional terms.
In Madagascar, the coverage aims to support the implementation of pre-approved contingency and response plans, helping to protect vulnerable populations, safeguard livelihoods and reduce the economic impact of flooding.
An initiative grounded in ARC’s mandate and experience
The launch of this first sovereign parametric flood insurance policy in Madagascar forms part of a long-term strategy led by the ARC Group to equip African countries with practical tools to anticipate climate shocks, reduce humanitarian impacts and strengthen community resilience.
Established by the African Union, the ARC Group supports its member states in managing climate-related financial risks through mechanisms focused on prevention, preparedness and rapid response. ARC, the insurance affiliate of the ARC Group, operationalises this mandate by delivering tailored risk financing solutions aligned with the specific risk profiles of African countries.
“This is only the beginning: we will roll out this solution across our Member States and continue expanding our portfolio to address additional climate risks in line with their evolving needs”, said ARC CEO David Maslo.
Since 2014, ARC has issued more than 300 sovereign insurance policies and paid out over $250m in claims, enabling governments to respond swiftly to the needs of populations affected by climate-related hazards.