International Humanitarian Organisations Replicate Insurance Cover: ARC Replica Revolutionises International Emergency Aid

Drought threatens livelihoods: a lack of rain can have devastating consequences for African farmers. Plants cannot grow during dry spells, and fruit wither on the branches. Crop failures threaten the livelihoods of entire farming families. In extreme cases, desperate people have to slaughter their chicken, goats, sheep and cows, sell their assets and are ultimately dependent on help from the government or international relief organisations.

African countries, in particular, are affected by increasingly frequent droughts. In emergency situations, both developing countries and international organisations usually need time to mobilise funds for urgently needed emergency aid and to organise relief measures. On average, it takes seven to nine months for emergency aid to reach the people who need it most. During this period, a drought can turn into a tragedy.

The African Risk Capacity (ARC) is one implementing partner of the InsuResilience Global Partnership. It has been offering a remedy since 2014: African Union member states can insure themselves against the consequences of drought. When droughts occur, the insurance disburses funds that the state can use to help its population quickly, for example with food or animal feed.

ARC Replica: the approach

A new addition is ARC Replica, a smart instrument to enhance drought insurance: ARC Replica allows international humanitarian actors to top up (“replicate”) the insurance coverage of countries that have already bought ARC policies. More emergency aid can be released in the event of a disaster as a result.

In cooperation with the United Nations World Food Programme (WFP) and the START Network, comprised of 42 international non-governmental organisations, ARC is piloting the Replica concept with Mali, Mauritania and Senegal in 2018, 2019 and 2020. The first milestone of ARC Replica is the first-time signing of a drought insurance by an international organisation (WFP) and a non-governmental organisation (START Network) in summer 2018. KfW Development Bank is providing EUR 10 million for the two-year pilot phase on behalf of the German Federal Ministry for Economic Cooperation and Development.

Changing the system of international emergency aid

The ARC Replica model could fundamentally change the system of international emergency aid: “Action instead of reaction” is the motto. By linking an insurance policy with ARC, the aid organisations know that they have funds at their disposal to help those affected right away should a disaster occur. In its role as a development bank, KfW provides funding to purchase policies and plan emergency aid; to conduct risk assessment or the preparation of the insurance contract (customization, contract details). Thus, humanitarian relief organisations are enabled to manage risks actively and proactively. This allows international aid organisations and the insured countries to plan emergency aid in advance and provide quick and effective help when a disaster occurs through the insurance payout. The speed of aid is a central component of ARC and ARC Replica.

According to the ARC concept, to conclude an insurance policy, countries are required to draw up detailed contingency plans. Two satellites continuously measure how much rainfall occurs in specific regions. The African RiskView software calculates if and when a drought is expected. If there is insufficient rainfall or if rainfall is inconsistent, the insurance is triggered based on a threshold value defined in the policy.

If an international organisation or NGO obtains additional insurance coverage for a country through ARC Replica, it coordinates its emergency aid plans with the country’s plans. This means that not only are national and international emergency aid measures interlinked but also their coordination is improved – people can be helped quickly and effectively in case of a disaster.

The approach followed by ARC Replica is revolutionary for international emergency aid. A successful pilot project could create completely new opportunities as it enhances the effectiveness of the humanitarian system and incentivises countries to take out insurance while increasing their coverage. ARC Replica therefore is an initiative which builds up processes, structures and capacities within NGOs and international organisations to purchase ARC’s drought insurance, which improves preparedness and financing in case of a disaster to better help the people in need.

Because no matter whether people are threatened by floods, hurricanes or drought: actively managing risks instead of passively reacting to crises should be the future of effective disaster relief ARC Replica is another step in this direction.

Written by KfW Development Bank