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The Pan-African Risk Management Capacity (ARC) has announced the official launch of the parametric insurance product against high-impact epidemic risks and Senegal’s participation as the first African country to join this innovative new financing mechanism.
African Finance Ministers in 2015 requested ARC to develop a product to meet countries’ rapid funding needs to contain high-impact infectious disease outbreaks and complement the efforts of the African Centre for Prevention and of disease control (Africa CDC).
In 2022, the ARC Group and its partners finalised the development of the said product, which will provide parametric insurance to African Union (AU) member states for three selected pathogens responsible for Ebola virus disease, Marburg virus disease, and Meningitis.
At a workshop held on September 28, 2022, in Dakar, the ARC’s parametric insurance product against high-impact diseases with epidemic potential was presented to the ARC’s Technical Working Group, which made a favourable recommendation for Senegal’s participation in the ARC’s sovereign parametric insurance product covering the costs of interventions in the event of epidemics of Ebola virus disease, Marburg virus disease, and Meningitis.
Thus, Senegal will become the first African country to benefit from this innovative financing instrument against epidemic outbreaks and thus paves the way for other member states of the African Union (AU).
“In our perspective of diversifying our product offering aimed at protecting the most vulnerable populations of our continent, we are today launching this new sovereign risk transfer mechanism through parametric insurance, which will allow our Member States to benefit, in addition to insurance against climate-related disasters, coverage against epidemic risks,” said UN Under-Secretary-General and ARC Group Director General Ibrahima Cheikh Diong. “We are confident that these predictable funding tools coupled with operational plans will strengthen the response capacity of our Member States while developing their expertise in the face of public health emergencies”.
The epidemic risk was estimated by Ginkgo Bio works; subscription to the insurance product was made through ARC Ltd, a financial subsidiary of ARC; Munich Re has been chosen as the lead reinsurer for the insurance product due to its long-standing expertise in epidemic risks and parametric insurance solutions; the reinsurance broking service was performed by AON, and the insurance premium was subsidized by the Swiss Agency for Development and Cooperation (SDC).
African Risk Capacity Group
The African Risk Capacity Group is composed of the ARC Agency and ARC Limited. ARC Agency was established in 2012 as a specialized agency of the African Union (AU) to help its member states improve their capacity to better plan for, prepare for and respond to climate-related disasters. ARC Ltd is a mutual insurance structure providing risk transfer services to member states through risk pooling and access to reinsurance markets. ARC was created on the premise that investing in preparedness and early warning through an innovative financial approach is highly cost-effective and can save up to four dollars for every dollar invested in ex ante approaches.
With support from the United Kingdom, Germany, Sweden, Switzerland, Canada, France, the European Union, the Rockefeller Foundation, and the United States, ARC is helping AU member states reduce the risk of loss and damage from extreme weather events affecting African populations by providing targeted responses to natural disasters in a more timely, cost-effective, objective, and transparent manner through sovereign disaster risk insurance. ARC is now using its expertise to help combat some of the other most significant threats facing the continent, including floods and epidemics.
Since 2014, 90 insurance policies have been signed by member states for a cumulative insurance coverage of US$900 million for the protection of 90 million vulnerable populations in participating countries.
