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The African Risk Capacity Replica

An innovative financial tool for humanitarian aid

  • 16 Oct 18

Blog Post

This is a guest blog written by Save the Children US.

Three significant challenges face humanitarian organisations today when responding to disasters: the lack of available funding for sustained responses to protracted crises (e.g. severe drought, famine and conflict); a lack of flexible funding to develop new, innovative approaches to humanitarian disaster response beyond traditional reactionary frameworks; and the universal need for rapidly accessible funding for timely and effective emergency responses. As a catalyst for humanitarian work world-wide and a strong advocate for innovation, The Rockefeller Foundation has partnered with Save the Children and The Start Network, to search for creative, cost-effective and forward-thinking solutions to these dilemmas.

One of Start Network’s chief aims is to create a menu of new financing instruments to enable fast, proactive humanitarian aid interventions that better respond to today’s realities and mitigate future disasters. We believe that with the support of forward-thinking donors like The Rockefeller Foundation, and through global NGO collaboration and experimentation in new business models for humanitarian response, we will achieve this objective.

Save the Children is proud to host, support and participate in the African Risk Capacity (ARC) Replica project as a member of the Start Network. We bring nearly a century of humanitarian aid experience to this important initiative and will provide management and financial oversight for this project.

 

The ARC Replica Instrument

With the support of the Rockefeller Foundation and as part of our efforts to meet this goal the Start Network is piloting a new financing instrument – the Africa Risk Capacity (ARC) Replica – an insurance mechanism designed to release funds early, quickly and predictably in humanitarian emergencies.

This financing instrument is underpinned by:

  • Science-based risk modelling to understand the emergency in areas of operation;
  • Contingency planning aimed at mitigating the impact of disasters on vulnerable communities; and
  • Pre-positioned funding for immediate humanitarian response.

This initial investment made possible by The Rockefeller Foundation supported Save the Children and the Start Network to secure additional funding from the German Development Bank (KfW) to launch a two-year ARC pilot. As a result, of the Rockefeller Foundation and KfW’s combined support, the Start Network and its members will be able to design and test the ARC Replica Coverage mechanism, offering a unique opportunity to learn from and refine the ARC process.

 

How ARC Replica Coverage Works

Under ARC Replica coverage, non-governmental partners, like the Start Network, are supported by partners to replicate the insurance policies purchased by ARC member states (purchasing a ‘Replica Policy’ means paying proportional matching insurance premiums for the same policy as the government). For example, in the case of drought, if rainfall levels fall below a pre-defined threshold, the Replica partner receives a proportional matching pay-out at the same time as the government. Based on pre-set contingency plans agreed upon with the government, rapidly disbursed payments will finance and facilitate pre-emptive activities and a timely comprehensive emergency response.

 

Activities to Date

The following is an overview of ARC Replica coverage activities accomplished to date, made possible by the generous support of the Rockefeller Foundation:

Collaboratively Designing ARC Replica Coverage

As a collaboration, the Start Network implements its initiatives through its member NGOs. In Senegal, six members (Save the Children, Action Against Hunger, Catholic Relief Services, Oxfam and World Vision) have engaged in the ARC Replica coverage design process. Working with multiple agencies has many advantages, including being able to draw on diverse expertise on multiple subjects and benefiting from these organizations’ collective global footprint.

Establishing a pre-agreed contingency plan – The case of Senegal’s Drought

Advance planning is key to rapid disbursement of funds during a policy pay-out – ensuring that assistance reaches crisis-affected people quickly and reducing the threat of future emergencies. To this end, the ARC process mandates the creation of a contingency plan in advance that outlines activities to be delivered to protect people from the effect of a humanitarian disaster. Take for example Senegal’s drought. While this contingency planning is required at a national level, the Start Network members wish to pilot a more detailed approach to build a richer picture that considers the specificities of Senegal’s different districts. Using an established international development tool, the Household Economy Approach (HEA), the potential income losses of families in each district of the country - in the case of varying severity of droughts - could be quantified. This helps determine appropriate interventions, the specific geographic areas to target during a pay-out and ensures activities fully complement planned government interventions. We Start Network members are adapting this approach to create a ‘HEA Light’ tool to streamline this methodology into the government of Senegal’s contingency planning for ARC in 2019. Once developed, we plan to apply this model to other emergency scenarios.

Customising the policy’s scientific model to the Senegal context

As a parametric (trigger based) policy, ARC’s insurance mechanism is supported by a scientific model that predicts the risk of drought based on climate and agricultural data collected throughout the growing season. This model, Africa RiskView (ARV), will be customised to each country where it is used, considering the specific climate, geography, agricultural practices and existing vulnerabilities of populations in the given context. The ARC Replica initiative gives Start Network members a unique opportunity take part in this customisation process – a first for civil society organisations.

Monitoring, Evaluating, Learning and Improving

As a pilot project, ARC Replica coverage offers the Start Network a unique opportunity to leverage the progress made by sovereign risk pools - when countries come together to share and protect themselves from specific risks that can affect their economies and populations. Through this partnership, The Rockefeller Foundation supports the creation of a monitoring, evaluation and learning framework that defines an approach and questions to be answered, progress tracking tools, and helps ensure constant improvements are made over the lifetime of the project.

Conclusion

Save the Children is deeply grateful to The Rockefeller Foundation for its support of the Start Network’s ARC Replica initiative. This essential partnership opens up a unique space in which to experiment with innovative approaches in disaster risk financing. It gives humanitarian organizations a rare chance to build the evidence base for new ways of funding, allowing us to be proactive in our global responses to current and future crises. On behalf of the entire Start Network and the people we serve, Save the Children thanks The Rockefeller Foundation for this valuable opportunity.

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