Parametric insurance mechanisms for humanitarian response

The Start Network is working with partners to develop two parametric insurance mechanisms that alleviate drought risk, prevent slow-onset food crises and ensure that the most vulnerable people benefit from climate risk protection.

One mechanism operates at the country level and the other at the civil society level, promoting a coordinated and proactive approach to contingency planning and implementation across the humanitarian system. Both mechanisms are based on a set of pre-agreed scientific parameters, such as rainfall or soil moisture.

When those parameters are breached, funding is triggered and released automatically. The value of the payout is not based on the estimated value of the loss, but rather on the cost of early actions to prevent the escalation of drought risk. These parametric mechanisms help to de-politicise emergency response and enable faster and more effective humanitarian action.

With funding from the Enhanced Learning and Research for Humanitarian Assistance (ELRHA)’s Humanitarian Innovation Fund, Start is working in partnership with GlobalAgRisk to develop a tailored drought model for which the software will be open source (provided freely to anyone).

The Start Network is also partnering with the African Risk Capacity (ARC) to explore the possibility of a one-year pilot to scale up its impact through a new ‘Replica Coverage’ facility. This facility seeks to better align the drought response work of humanitarian agencies operating in ARC-member countries with government plans already in place via their sovereign insurance coverage.

This Replica Coverage facility would support the G7 InsuResilience Initiative by enabling closer working between humanitarian organisations and governments to reach an additional 200 million vulnerable people across Africa with climate risk insurance by 2020.

This case study was originally published in full in Weathering a risky climate, by Results.

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