The German Government has committed €18mn ($21mn) to subsidize the cost of disaster risk insurance for qualifying African Risk Capacity (ARC) member states.
Speaking at the COP26 climate talk in Glasgow, Germany’s parliamentary state secretary for development aid Maria Flachsbarth, said the commitment will help establish a Premium Support Facility for African governments and humanitarian agencies wishing to purchase climate-related insurance.
The ARC risk pool is an African Union initiative led by 35 member states. It provides insurance for droughts and tropical cyclones and offers governments the opportunity to plan and purchase cover that can provide rapid payouts in the event of a qualifying loss event.
Since 2014, 62 policies have been signed by Member States for cumulative insurance coverage of $720mn for the protection of 72 million vulnerable populations in participating countries.
The planned Premium Support Facility will be designed to respond to more frequent and severe extreme weather events driven by climate change in vulnerable African countries.
This new funding will subsidize insurance premiums, decreasing in future years as countries and organisations are able to take over the costs using their national budgets and long-term sustainable financing.
It comes as many African governments have severely constrained budgets following the Covid-19 pandemic, and humanitarian agencies are struggling to meet demand for aid.
Christian Krämer, member of the management committee at KfW Development Bank said Germany has been a long-standing supporter of ARC.
“Earlier this year, in Germany we were affected by devastating floods – we have experienced ourselves the importance of preparedness and the vital role that insurance can play in recovery,” Krämer said.
Ibrahima Cheikh Diong, United Nations Assistant Secretary-General and director-general of the ARC said that the grant is a “clear testimony” of the value of partnerships for smart disaster risk management and financing for early action.