The African Risk Capacity (ARC) is a pioneering initiative that seeks to build resilience to climate risks across Africa by combining sovereign risk insurance with strengthening of disaster risk management (DRM) systems and frameworks. Findings from a formative evaluation of ARC have recently been published and provide important insights and lessons for the global conversation on climate risk insurance and, more generally, building the resilience of countries and vulnerable populations. The evaluation was commissioned by the UK Department for International Development (DFID) and undertaken by Oxford Policy Management (OPM).
A brief that highlights some of the main findings of the evaluation as they relate to this newsletter’s theme of data, innovation and knowledge is available here. The brief covers the following points:
ARC represents an innovative approach for addressing vulnerability to climate change and building resilience to shocks at scale.
Through a pooled insurance model, ARC offers African countries competitive pricing for sovereign insurance products. Importantly, however, ARC’s offering goes beyond the insurance product: at the national level, ARC helps governments to better anticipate, plan, and respond to disaster risk by strengthening capacities, awareness, and action for DRM. At the local level, it helps to improve the resilience of vulnerable households to disasters through the delivery of timely and appropriate support by directly linking the provision of insurance with pre-agreed contingency plans through which the response to affected households can be tracked.
Uniquely, countries who wish to join the ARC risk pool must first undergo a capacity-building programme which covers early warning, risk modelling, contingency planning, disaster risk management and risk financing. This includes training on Africa RiskView (ARV), ARC’s proprietary software, which uses data to estimate drought-related humanitarian response costs and define triggers for the parametric insurance. In the event of a disaster, a payment to the affected Government is triggered and resulting funds are then used for pre-agreed rapid response plans that complement existing social safety net programs or other humanitarian response.
A 10-year independent evaluation of ARC, commissioned by DFID, will generate knowledge to guide ARC’s development and to inform the global evidence base on disaster risk financing and resilience building.
The evaluation is being undertaken in four stages: two formative evaluation stages (the first of which has now concluded), and two impact evaluation stages further down the line. It adopts a theory-based approach that is centred around a detailed depiction of the changes that ARC aims to bring about.
While it is too early to assess the contribution that ARC has made towards its desired outcomes and impact, the first formative evaluation allows for an understanding of ARC’s progress, as well as where headway is being made, what challenges exist and where assumptions might not be holding. This evaluation stage involved qualitative fieldwork in three countries (Kenya, Malawi and Mauritania), interviews with 30 international experts in the area of climate insurance and reinsurance and DRM, a perceptions survey with 30 representatives of 17 African countries, and a ‘baseline assessment’ of disaster risk and DRM trends across African Union countries. ARC also contributed to the evaluation, offering insight on the successes, advancements and challenges involved in their work.
Important learnings emerge in relation to the following topics, described in more detail in the brief:
• Using data and parametric modelling to understand climate risk and trigger pay-outs
• Building capacity for DRM planning and systems
• Getting insurance contracts and contingency plans in place
• Effectiveness and timeliness of contingency plan implementation
ARC welcomed the evaluation and chance to share its experiences – both successes and the challenges – in delivering this critical offering to African countries.
ARC sees such engagement as an important learning opportunity for the institution, member states and the broader disaster risk management and financing community. It is also part of a fundamental commitment to transparency on the part of the institution. In general ARC has exhibited a commitment to incorporating lessons learnt and, as a young organisation conducting highly innovative work, such nimbleness is important in order to ensure that the institution will continue to meet its designed goals and mandate. Some of the recommendations made in the report are already being incorporated into the operation of the institution i.e. enhancing communications, improving awareness of products among stakeholders, and the above-mentioned ongoing R&D work regarding Africa RiskView.