Action instead of reaction: KfW supports innovative drought insurance for emergency aid organisations in Africa

• EUR 10 million for ARC Replica, the new approach by African Risk Capacity drought insurance
• Insurance agreements concluded with the World Food Programme and START Network
• More emergency aid measures and faster effective aid possible

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW has for the first time provided EUR 10 million to emergency aid organisations within the framework of a two-year pilot phase for the innovative ARC Replica insurance instrument. The United Nations World Food Programme (WFP) and the non-governmental organisation START Network (START) have concluded the first insurance agreements for Mali, Mauritania and Senegal. They are benefiting from a new auxiliary insurance instrument from African Risk Capacity (ARC) for damage caused by drought in Africa. It offers countries early warning systems and emergency aid planning. As soon as an African state has acquired an insurance policy at its own expense through ARC, international emergency aid organisations can increase the insured amount, which means that they can conclude a policy in the same amount with their funds. As a result, more emergency aid can be financed than was previously possible in the event of a disaster, and aid can be provided more quickly and effectively.

“The ARC Replica model could fundamentally change the system of international emergency aid. The motto is ‘action instead of reaction’. By concluding an insurance policy with ARC, aid organisations know that they quickly have the funds at their disposal to help those affected right away should a disaster occur,” said Dr Joachim Nagel, Member of the Executive Board of KfW Group.

According to the ARC concept, to conclude an insurance policy, countries are required to draw up detailed emergency aid plans. Two satellites continuously measure how much rainfall occurs in specific regions. Software calculates if and when a drought is expected within the framework of the early warning systems. If there is insufficient rain fall or if rain fall is inconsistent, the insurance is triggered based on a threshold value defined in the policy.

If an international organisation obtains additional insurance coverage for a country through ARC Replica, it coordinates its emergency aid plans with the country's plans. This enables national and international organisations to coordinate their measures with one another, which leads to more effective aid for the people affected by drought.