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  • Insuring countries against natural disasters: pool rules
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Insuring countries against natural disasters: pool rules

Source(s):  International Food Policy Research Institute (IFPRI)

IFPRI policy brief 22:

This brief summarizes the key lessons that have emerged from a cost-benefit analysis of the African Risk Capacity (ARC) pool, a proposed pan-Africa drought risk pool that would insure against drought risk in Africa south of the Sahara, and discusses how these lessons can be more broadly applied to other cross-country pools.

It proposes 8 key lessons: (i) governments need to make a clear commitment to rules-based disbursement of claim payments; (ii) insurance mechanisms should focus on large infrequent payments, with other systems handling smaller, more frequent events; (iii) the larger and more diversified the pool, the greater the benefits from pooling, as reinsurance will be less expensive, and less reinsurance will be needed; (iv) controlled administrative costs and cost-effective risk financing strategies are both critical to preserve the pool’s value; (v) conditions for payments should be objective and widely known; (vi) proposals should be evaluated thoroughly, drawing insights from different disciplines; (vii) catastrophe risk pools can offer members more than just cheap risk transfer products; and (viii) it is important to structure a pool correctly from the beginning.



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  • Insuring countries against natural disasters: pool rules
  • Publication date 2013
  • Author(s) Clarke, Daniel J.; Vargas Hill, Ruth
  • Number of pages 4 p.

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