African Risk Capacity provides insurance cover to 9.7m Africans in 4 years – Okonjo-Iweala

The African Risk Capacity initiative says it has underwritten about 400 million dollars of drought risk and provided cover to 9.7 million Africans in its insurance policy in the four years of its operation.

The initiative, a specialised agency of the African Union, was designed to provide current responses to climate-related food security emergencies.

The Chairperson of the initiative, Mrs Ngozi Okonjo-Iweala, announced the package on Wednesday in Busan, South Korea, at a high level session organised to highlight importance of disaster risk financing in building resilience among African countries.

The event was part of activities marking the five-day Annual Meetings of the African Development Bank (AfDB), hosted by the Asian government.

“In four years, we paid over 36 million dollars to four countries and it has helped 2.1 million people and over one million livestock,’’ she said.

The former Minister of Finance said the establishment agreement of the initiative had been signed by only 33 of the African countries and was able to set up an insurance agency as a neutral body in 2014.

She said Germany and the United Kingdom committed about 200 million dollars in the risk capital through a 20-year non-interest loan and had already disbursed 90 million dollars of the fund to shore up the agency.

She, however, added that only eight of the countries were able to participate in the drought risk policy through the facility and were able to pay 54 million dollars to transfer their drought risk through the facility.

Okonjo-Iweala, who was elected Chairperson of the agency’s Governing Board in 2013, explained that 95 per cent of the premium paid by the countries was sourced from their national budgets.

“This is the only organisation among those doing weather-based insurance where people’s monies are coming from our own resources and that is why we want to promote the need to rely on ourselves.’’

She further said the essence of the initiative was to provide targeted responses to disasters “in a more timely, cost-effective, objective and transparent manner, thereby reducing the cost of response to government and reduce loss of livelihood’’.

The chairperson said the rationale was also based on responding earlier to a disaster before bursting into crisis because it would be financially efficient and more economical.

“We found through our studies that one dollar spent on any intervention through African Risk Capacity saves nearly four and a half dollars spent after a crisis is allowed to erupt.

“Such approach to early planning and not allowing fully fledged crisis to erupt is one aspect of building resilience preached by the African Development Bank.’’

The former minister expressed the belief that African Risk Capacity was about Africans taking charge of their own affairs and finding a way to finance their responses and ensuring their resilience to development.

“We cannot continue to be a continent that continuously depends on generosity of other countries.’’

The AfDB’s meetings, with the theme: “Accelerating Africa’s Industrialisation”, is hosted by the Korean Government through the Korea-African Economic Cooperation (KOAFEC) as a non-member of the bank group.