The African Risk Capacity (ARC) Group, a provider of parametric disaster insurance products to countries and other entities in Africa, has made a combined parametric insurance payout of just over $5.4 million to support Mozambique’s response to the 2024/25 drought and to Tropical Cyclone Chido.
According to the announcement, the Government of Mozambique received just over $1.8 million for drought response, while Replica partner, the World Food Programme (WFP), which took out two insurance policies for drought and tropical cyclone on behalf of the country through the Replica programme, received $400,000 for drought and $3.1 million to support response to Cyclone Chido.
Due to its geographic location, Mozambique is prone to seasonal cyclone events. The south-east African country also grapples with cyclical drought events, which serves as a stark reminder of the growing climate crisis globally.
Moreover, the funds received from ARC will enable crucial life-saving interventions in the form of large-scale food distribution for affected communities.
It is essential to emphasize how this disbursement distinctly highlights the vital function of parametric insurance in building resilience and enabling prompt, pre-planned responses in the aftermath of increasing and intensifying climate-related shocks.
Albertina Fruquia Fumane, Permanent Secretary in the Minister of Finance, commented: “The insurance is an important defence line to protect the lives of the most vulnerable by reducing fiscal and social vulnerability. The Government has been investing in strengthening its capacity to respond and building resilience, and in the development of guiding instruments.”
David Maslo, ARC Ltd Interim CEO, said: “This payout demonstrates the value of ARC’s parametric products, which deliver fast and predictable finance when needed most.
“As a Class A Member of ARC, Mozambique not only benefits from insurance that keeps coverage affordable but also has the assurance that an AU-mandated institution will continue to support it against climate shocks. This is what sets ARC apart: an African-led solution that works, combining innovation, solidarity, and resilience for our Member States.”
Additionally, Mozambique’s participation in ARC risk pools was made possible by an insurance premium paid in part by the government, with premium support contribution from the Africa Disaster Risk Financing Programme ADF Fund (ADRiFi-ADF).
ADRiFi is a framework developed as a collaboration between the African Development Bank and the ARC Group.
Andrew Mude, AfDB’s Lead SME Agribusiness Development, added: “ADRiFi has proved that prearranged finance works. We’ve seen it strengthen national systems and transform our countries to prepare for shocks. With Mozambique’s leadership, and that of many others who are here today and have been pioneering in this space, we have come to see that when we finance in advance, we can reduce the impact of this crisis.”
WFP Country Director, Claire Conan, stated: “This partnership with ARC and ADRiFi partners has already yielded concrete results. Following Tropical Cyclone Chido, Mozambique’s cyclone insurance policy was activated, releasing US$3.1 million for WFP to respond quickly in Nampula and Cabo Delgado. This payment enabled rapid support to affected communities, complementing government actions and reducing the need for emergency appeals.”
Jean Chrysostome Ngabitsinze, ARC Group Director General and Assistant Secretary General, said: “The impacts of persistent weather-induced disaster events on lives and livelihoods have been devastating on many levels. ARC stands with the Government of Mozambique during these difficult times. We are honoured to partner with the country as it continues to strengthen its preparedness to respond to such catastrophes.”
