African Risk Capacity ARC First Ever African Natural Disaster Insurance Pool Launched May 2014

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African Risk Capacity ARC First Ever African Natural Disaster Insurance Pool Launched May 2014 …

African Risk Capacity ARC First Ever African Natural Disaster Insurance Pool Launched May 2014
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  • 1. African Risk Capacity Insurance Company Ltd Registered Office: Canon’s Court 22 Victoria Street, PO Box HM 1179 Hamilton HM EX, Bermuda FIRST EVER AFRICAN NATURAL DISASTER INSURANCE POOL LAUNCHED Johannesburg, South Africa and Hamilton, Bermuda: Wednesday 14th May, 2014 – The first ever African catastrophe insurance pool has been launched by the African Risk Capacity (ARC), a specialised agency set-up by the African Union to help member states become more resilient to extreme weather events and to protect food insecure populations, in light of climate change. The ARC Agency has created a specialist hybrid mutual insurance company, ARC Insurance Company Limited (ARC Ltd), initially domiciled in Bermuda, to issue policies to a group of African governments, initially comprising Kenya, Mauritania, Mozambique, Niger and Senegal. Germany and the United Kingdom contributed the initial capital and are also founding members of the mutual. “The creation of the first ever African catastrophe insurance pool is a transformative moment in our efforts to take ownership and use aid more effectively. It is an unprecedented way of organising ourselves with our partners, with Africa taking the lead – taking our collective destiny into our own hands, rather than relying on the international community for bailouts,” said Dr Ngozi Okonjo-Iweala, Chair of the ARC Agency Board and Nigeria’s Minister of Finance. The aim of the ARC catastrophe insurance pool is to reduce African governments' reliance on external emergency aid. Currently international assistance is secured through an appeals system and then allocated on a largely ad hoc basis once a disaster strikes. Consequently, African governments affected by disasters can be forced to reallocate funds from essential development projects to crisis responses, exacerbating problems in other areas of their economies. Kenya’s Cabinet Secretary for the National Treasury, Henry Rotich, affirmed, “Droughts undermine our hard-won development gains, just as Africa is beginning to realise its vast potential. ARC will help us build resilience among vulnerable populations, protect our agriculture investments, thereby increasing productivity, as well as promoting fiscal stability by preventing budget dislocation in a crisis.” “I’m proud to have overseen the establishment of ARC Ltd, and am pleased to acknowledge the financial support of US $200 million by the UK and German governments through DFID and KfW respectively,” notes Chairman of the Company Board of Directors and former head of the International Finance Corporation, Dr. Lars Thunell. “ARC Ltd’s insurance programme goes a step further than previous sovereign risk pools thanks to its close ties with ARC Agency. Through the development of contingency plans linked to rapid payouts under the parametric insurance policy, the benefits of ex ante sovereign risk financing will flow directly to the most affected food insecure populations.”
  • 2. ARC Ltd: Press Release 2 The parametric insurance policies issued this month by ARC Ltd will provide a total of ~US $135 million in drought insurance coverage tailored to the specific requirements of the insured countries. In addition to its own capital, ARC Ltd has secured US $55 million of capacity from the international reinsurance and weather risk markets in order to cover the risks it is taking on from the participating countries. ARC Ltd utilises a new software application called Africa RiskView developed by the UN World Food Programme to estimate crop losses and drought response costs before a season begins and as it progresses, triggering insurance payouts at or before harvest time if the rains have been poor. ARC’s cost-benefit analysis estimates that spending one dollar on early intervention through ARC could reduce ultimate economic impact by as much as four and a half dollars. The launch of the risk pool is timely given recent global warnings about the adverse consequences of a changing climate, as Dr Richard Wilcox, Director General of the ARC Agency noted, “ARC is a critical instrument for countries to manage their risks as they experience the consequences of climate change.” “ARC is a breakthrough in disaster risk management in Africa, a win-win for governments and their partners alike. By putting their political legitimacy and technical skills together, the African Union and WFP have created a game-changer,” commented Nobel Laureate Professor Robert Shiller. ARC Ltd’s incorporation and start up has been supported by a number of partners, including Stroock & Stroock & Lavan LLC, Appleby Bermuda, Marsh IAS as Insurance Manager in Bermuda, and Willis Group as reinsurance broker. Notes for Editors About African Risk Capacity Agency The African Risk Capacity (ARC) was established in 2012 as a Specialised Agency of the African Union (AU) by a Conference of Plenipotentiaries to help AU Member States improve their capacities to better plan, prepare and respond to extreme weather events and natural disasters. It aims to assist its Member States to protect the food security of their vulnerable populations. The objective of the ARC Agency is to assist AU Member States to reduce the risk of loss and damage caused by extreme weather events and natural disasters affecting Africa's populations by providing targeted responses to disasters in a more timely, cost-effective, objective and transparent manner. For more information, please visit: http://www.africanriskcapacity.org
  • 3. ARC Ltd: Press Release 3 About African Risk Capacity Insurance Company Limited The African Risk Capacity Insurance Company Limited is a financial affiliate of the African Risk Capacity (ARC), incorporated initially in Bermuda as a ‘hybrid mutual’ Class 2 insurance company. Membership in the company via the 2014 insurance pool includes the following countries, which have taken out insurance contracts for coverage of agricultural seasons beginning during the calendar year from1st May: Kenya, Mauritania, Mozambique, Niger and Senegal. The membership will also include its capital contributors. The United Kingdom (through DFID) has committed GBP 100 million to the project, the first GBP 30 million of which has already been made available to ARC Ltd, and Germany (via KfW) has committed EUR 50 million, of which EUR 35 million has already been made available to ARC Ltd. For more information, please visit: http://www.africanriskcapacity.com/ Press Contact Roddy Langley Lysander PR London United Kingdom roddy@lysanderpr.com + 44 (07740) 633296 Ends