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OPINION: Strength in unity – African countries pool climate risks for better insurance against droughts

Fatima Kassam explains how a groundbreaking extreme weather insurance scheme, coupled with capacity building services, can help African Union member states resist and recover from the ravages of drought. Fatima is the Chief of Governmental Affairs and Policy for this new insurance scheme, named African Risk Capacity.

Six months from now, the world’s leaders will gather in Warsaw, Poland, for yet another round of negotiations on the challenges and opportunities posed by climate change – who is responsible for the phenomenon, what should be done to address its effects, who should pay for the necessary adaptation and mitigation measures, how much and to whom the bill is due?

We cannot allow ourselves to become detached in these environments; the words we publish must mean something. And, for the generations that follow, I’d like to be on record for having contributed to actually shifting the current paradigm in thinking about climate risk and Africa’s endless possibilities.

It is widely acknowledged that Africa is responsible for less than 3 percent of global greenhouse gas emissions, yet our continent – and most importantly its people – are the most vulnerable to its effects. Just as we’re beginning to reap the benefits of the past decades’ investments in good governance, institution building, human and natural resources, more frequent and more intense droughts, floods and cyclones driven by climate change threaten record GDP growth and hard-won gains in development.

But it is not people like you and me who bear the burden of these natural disasters. It is subsistence farmers and pastoralists – with the most limited capacities to cope – who shoulder the burden of climate risk. As currently structured, the international system for responding to natural disasters is not as timely or equitable as it could be. Funding is secured on a largely ad hoc basis after disaster strikes and only then can relief be mobilised toward the people who need it most. In the meantime, lives are lost, assets are depleted, and development gains suffer major setbacks – forcing more people into chronic destitution and food insecurity in the world’s least developed countries. For this silent majority, Africa’s agenda is “Development First” – inclusive, sustainable development. We may not be able to adapt what we don’t yet have, but let’s at least protect what we have built.

So, how do we move from dependence on international assistance to effective risk management? On the 50th Anniversary of the Organisation of African Unity, we must thank our forefathers for their vision and leadership because pan-African solidarity in approaching climate risk makes financial sense. 22 African governments have bonded together to form the African Risk Capacity (ARC), a groundbreaking extreme weather insurance scheme designed to help African Union member states resist and recover from the ravages of drought. ARC is an African solution to one of the continent’s most pressing challenges, providing timely funds to African governments when disaster strikes while decreasing reliance on emergency aid. Taking advantage of our natural diversity, ARC uses modern satellite technology and financial tools to aggregate risk across the continent. Going to the weather risk markets together as a pool halves the amount we need in contingent capital – and therefore the amount that each government would have to pay in premiums for drought insurance next year.

But an insurance policy is simply not enough to educate government technicians in the virtues of risk finance or to embed climate data-driven decision making linked to contingency planning and execution. Therefore, the ARC Specialized Agency, chaired by Dr Ngozi Okonjo-Iweala, Coordinating Minister for the Economy of Nigeria and one of my personal heroines, offers capacity building services to governments for a full year prior to taking out an insurance contract. During this pre-participation period, the ARC Secretariat assists government ministries in constructing credible operational response plans linked to payouts so that we can be sure early monies will result in early intervention to vulnerable populations.

While insurance will not fully address chronic food insecurity and hunger in Africa, ARC is a step in the right direction to keep the problem from getting bigger. The value of ARC is maximised in helping governments at first protect the populations to whom they are accountable, and over the years, preserve the benefits of long-term public and private investments in the agricultural sector complementing the Comprehensive African Agriculture Development Program (CAADP) and Grow Africa among others.

Photo of a government officer using Africa RiskView software.

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