African Risk Capability (ARC) has launched Africa’s first sovereign parametric flood insurance policy, with the Republic of Madagascar becoming the first country on the continent to take out the new policy.
ARC worked closely with JBA Risk Management to develop a parametric flood insurance solution based on scientific data and advanced hydrological models. This enables objective, transparent payments when predefined impact thresholds are reached. Unlike traditional insurance mechanisms, this approach allows governments to quickly obtain financial resources without waiting for lengthy post-disaster damage assessments.
The mechanism is designed to ensure payments are made within up to ten days of confirmation of a flood event.
The Government of Madagascar has obtained a sovereign parameters insurance policy to cover flood-related loss and damage. The policy is made possible through a long-standing partnership between ARC and the African Development Bank, which enables insurance to be provided on favorable terms.
In Madagascar, the coverage is designed to support the implementation of pre-approved emergency and response plans to help protect vulnerable people, safeguard livelihoods and reduce the economic impact of floods.
Dr. Ramiarison Herijantovo Aimé, Minister of Economy and Finance of the Republic of Madagascar, said: “The floods that affected the capital in early January, affecting more than a thousand people, have once again highlighted Madagascar’s vulnerability to climate disasters. In this context, parametric insurance is a strategic lever to strengthen our rapid response capabilities, mobilize timely financing and better protect the most affected people.”
The policy launched in Madagascar is part of a long-term strategy led by the ARC Group to provide African countries with practical tools to predict climate shocks, reduce humanitarian impacts and build community resilience.
Dr Jean Chrysostome Ngabitsinze, Director General of the Africa Risk Capacity Group, said: “This new flood product reflects the continued development of Africa-led climate risk management solutions. It demonstrates our collective determination to move from a reactive approach to a forecast-centric approach, using innovative tools tailored to the continent’s realities.”
David Maslo, CEO of ARC Ltd., added: “Flood risk is one of the most complex hazards to model. After several years of dedicated research and investment, we are pleased to launch this parametric flood insurance solution, built on state-of-the-art flood risk models and tailored to the specific circumstances of African countries. This is just the beginning: we will roll out this solution across our member states and continue to expand our portfolio to address additional climate risks in line with their evolving needs.”
