The African Risk Capacity (ARC) Group has launched an insurance mechanism for African countries to cope with the devastating effects of flooding.

Development Diaries reports that the new mechanism, which is the parametric insurance product, is designed to provide countries with predictable and rapid financing for early response to cope with emergency disaster events caused by floods.

Announcing the launch of the product, ARC said the mechanism is a significant milestone in building resilience to climate-related disasters and in complementing the ARC solutions.

The number of flood events in Africa has increased significantly, including in many major urban centres and coastal areas.

These have resulted in numerous deaths and the displacement of millions of people and caused significant damage to property and farmlands worth billions of U.S. dollars.

A 2022 report by International Finance Corporation (IFC) revealed that since 1990, droughts and floods have respectively lowered African countries’ GDP by 0.7 percent and 0.4 percent.

Also, data from the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA) shows that in 2022, flooding affected over 5.8 million people in 20 countries in the West and Central Africa regions.

‘Member states have expressed a strong interest in the development and delivery of a flood insurance product to help countries respond timely to flood disasters’, the specialist agency of the AU said in a statement.

The group said it has partnered with JBA Risk Management to develop a model to support the delivery of a practical and customisable parametric flood insurance product.

It noted that the flood product would generate daily flood analysis and calculate the associated impacts for each country.

Photo source: United Nations