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AT LEAST 55% OF CRISES CAN BE PREDICTED BUT LESS THAN 1% OF HUMANITARIAN FUNDING IS RELEASED EARLY

  • by Nelly Maonde
  • 22 Feb 22

Blog Post

"Early intervention through insurance drastically increases the number of people who can be helped"

- Nelly Maonde, Start Network Country Disaster Risk Finance Coordinator - Zimbabwe

Technology today is evolving at an extraordinary and accelerating pace. It is changing the very way we live and work. Its ability to assist humanitarian action in low-income countries has alerted donors, practitioners and governments to its potential.  Southern Africa is the current focus of humanitarian concern and a number of Anticipation and Disaster Risk Financing systems, for instance, are being deployed to avert potential crises.  

According to a study by Concern Worldwide, Oxford Policy Management (OPM) and the Partnership for Research in International Affairs and Development (PRIAD), technology is felt to have potential ‘to detect needs earlier, enable greater scale and speed of responses, enhance specificity of resource transfers to match needs and increase accountability while reducing opportunities for corruption and diversion’.  However, the report noted that despite overall positive experiences with these technologies, they are not being adopted systematically in humanitarian programming contexts where systems and potential exist. 

By supporting to fill this void, Start Network is catalysing the adoption of latest technological tools, where most needed. The core premise of technologies we promote is based on factual information that some climate-related disasters such as drought are common place and can be insured.  

An Africa Risk Capacity (ARC) Cost Benefit Analysis (CBA) conducted in 2013 and updated in 2020 estimated a potential additional benefit – relative to the status quo of ad hoc and delayed humanitarian response – of US$ 1.90, for every dollar invested in ARC premium. The study assumed pre-agreed contingency plans would reduce the costs of delivering humanitarian assistance to the poor, while improving the speed and targeting associated with the delivery of these benefits.  When the long-term benefits were factored, the additional benefits to poor households could rise to above US$4 (Tables 2.1  and  5.2). 

Start Network and ODI statistics show that at least 55% of crises are somewhat predictable, but less than 1% of humanitarian funding is released based on pre-agreed triggers or plans hinged on regional risk pools and early action systems1. The vast majority of humanitarian funding is allocated after a crisis has happened, with more time spent on operational planning after securing the funding, leading to preventable loss of lives and livelihoods.  

The logic behind using financial instruments like insurance to protect people against a predictable hazard such as widespread, severe drought led Start Network to support ARC insurance model for drought.  After a successful joint policy with the government of Senegal against drought for the 2019/2020 agricultural season, Start Network has renewed the policy for the 2021-2022 season and after exploring needs in Southern Africa, we purchased another policy to replicate the government of Zimbabwe’s policy 2021-2022 as well. Start Network will be working alongside the Government of Zimbabwe and the World Food Programme (WFP), who launched ARC Replica in the country in 2019. Having three ARC policy holders in Zimbabwe ensures that a great number of vulnerable Zimbabweans are covered against the risk of major droughts. In addition, Start Network will work with the WFP to provide technical support to the government and other stakeholders in order to increase national capacity and ownership of disaster risk financing in the country.  

Saving lives and livelihoods 

ARC is an organisation mandated by the African Union to help African nations proactively manage climate-related humanitarian risks through macro-insurance. The ARC Replica programme allows non-governmental organisations like Start Network and the WFP to work side-by-side with governments to manage these risks. Through insurance policies and technical partnership, the ARC Replica programme aims to save lives and protect livelihood assets while minimising negative coping strategies. This is achieved by proactively managing drought risk through early action and response, before the risk morphs into a crisis, thus enabling us to assist more people earlier than would otherwise have been possible. 

These ARC Replica policies are premised on the basis that if rainfall levels drop below a pre-defined threshold, the Replica partner (Start Network members and/or WFP) and the government of the targeted African country would receive insurance pay-outs to implement pre-identified interventions to protect communities at risk earlier than traditional response timeframes. The ‘trigger’ for pay-out is defined in the insurance policy, and is typically triggered by an objective indicator, such as the calculation of an index.  As ARC’s CBA analysis shows, such early intervention cost less than what post-event interventions would cost, reducing the humanitarian response cost. 

Such policies also shift risk from farmers to financiers. Nearly half of all emergency multilateral food assistance to Africa is to assist with natural disasters. While taking out insurance on the vagaries of climatic related disasters is common practice in developed countries, in Africa and other developing countries, it is not common to see national-level insurance policies for drought, which would protect some of the poorest populations dependant on rain fed agriculture.  

Through the ARC Replica programme, Start Network and WFP are contributing to innovation in the way climate risks are managed on the African continent.  Working together with the respective governments, the two agencies have bought policies in 7 countries and plans to support more countries are currently in progress.   We hope that more African Governments will join the ARC initiative in the future so that more at risk populations in Africa can be protected against climate risks.  

 

Get to know ARC Replica and what we do.

Learn more about ARC Replica here.

Keep reading:

ARC Replica Climate Adaptation Risk Financing

  • by Nelly Maonde