International Day for Disaster Risk Reduction – Why Climate Insurance Matters! | African Development Bank Group

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By Dr. Beth Dunford

Climate change is one of the most significant challenges facing Africa today, with serious consequences for the continent’s food security, livelihoods and economic growth. The increased frequency and intensity of extreme weather events such as severe droughts, floods and tropical cyclones are triggering destabilizing situations and leading to significant losses of livelihoods and assets in many African countries, reversing the gains made by the development, pushing more families into poverty and widening economic gender gaps. The area.

Many African governments, struggling to cope with the Covid-19 pandemic, rising food and fuel prices and the impacts of the war in Ukraine on their food import-dependent economies, have limited resources to address the risks of climate disaster – and often act after a disaster.

We believe that managing climate risks, through instruments such as risk insurance or conditional credit lines that help governments obtain funds before a disaster, can help African countries provide more relief. respond to disasters and take a faster and more sustainable path to recovery, thereby strengthening the resilience of their countries. climate-vulnerable sectors and communities.

According to the World Meteorological Organization, more than 1,695 climate-related disasters have been recorded in Africa over the past 50 years, responsible for more than 731,747 deaths and causing nearly $40 billion in economic damage. Recent cyclones Idai, Kenneth, Batsirai and Freddy in southern Africa, as well as the most prolonged and severe drought in recent history in the Horn of Africa from 2020 to 2022, have affected at least 36.4 million people and led to the loss of at least seven million head of livestock, according to the United Nations.

The situation in Africa is precarious. We must reduce the level of disaster risk on the continent.

In this context, the African Development Bank partnered with the African Risk Capacity Group to create the Africa Disaster Risk Financing Program in 2018. This program strengthens the resilience and response of African countries to climate shocks by improving their management of climate disaster risks. Through this program, the Bank has invested more than $100 million to help 15 African countries obtain risk insurance policies for national governments against drought and tropical cyclones.

Today, through the Africa Disaster Risk Financing Program, more than five million of Africa’s most vulnerable people to climate change-related disasters have received financial protection since 2019. For example, the Government of Malawi received $14.2 million in disaster risk insurance payouts to help authorities respond. to drought last year. Madagascar has received more than $13 million to provide emergency food aid, reconstruction and resilience programs following the devastating crop drought in 2021 and 2022 and tropical cyclones in 2022 and 2023.

The international community supports what we are accomplishing in Africa. The governments of the United Kingdom, Switzerland, Canada and the United States are among our partners contributing to the financing of the African Disaster Risk Financing Program Multi-Donor Trust Fund, which supplements the Bank’s resources to administer the program.

Building on the success of the program, the Bank announced the establishment of its African Climate Risk Insurance Facility for Adaptation (ACRIFA) at the African Climate Summit last month. This facility aims to raise $1 billion in high-risk concessional capital and grants to drive the development and adoption of climate risk insurance. The Facility targets primary insurers and regional reinsurers across Africa to provide these insurance solutions. This will enable the Facility to support the design and wider use of climate-related catastrophe insurance products; extend credit insurance to investment portfolios in the areas of climate, agri-food system and business development; leverage the network of African primary insurers to ensure the flow of capital, capacity and business opportunities; and help national governments effectively organize in advance financing to respond to and manage climate disasters.

The International Day for Disaster Risk Reduction provides an opportunity to reflect on the progress made in managing climate disasters in Africa. The theme of the day “Fighting inequalities for a resilient future” reminds us that there can be no shared prosperity if we do not reduce inequalities resulting from the hazards linked to climate change. We take this opportunity to invite the international community as a whole to join us in expanding access to diversified climate disaster risk financing instruments. We envision a future Africa where at least 10 million vulnerable people, particularly women and children, are insured against climate disaster risks every year, and where communities and wider businesses are equipped to be more resilient in the face of climate disasters. to climate change.

About the Author

Dr Beth Dunford is Vice President for Agriculture, Human and Social Development at the African Development Bank Group.

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