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The government of Madagascar received a symbolic cheque on 7 July for US$2.13mn from the African Risk Capacity Insurance Company Limited (ARC Ltd) to cover anticipated losses to livelihoods from crop failure in the just concluded farming season

StockFynaStoryARC and AfDB signed a MoU in March 2017 to support African states to manage disaster risks and be better prepared for climate-related perils. (Image source: homocosmicos/Adobe Stock)

The ARC payout is the result of drought insurance taken by the country with the support of the African Development Bank, through the Africa Disaster Risk Financing (ADRiFi) programme, which financed 100 per cent of the 2019-20 insurance premium for sovereign drought risk transfer for the Republic of Madagascar.

The Minister of Economy and Finance, Richard Randriamandrato, during the official handover ceremony stated, "The drought insurance of African Risk Capacity is one of the sustainable solutions to strengthen the efforts of the government and partners in the Southern region of Madagascar. It demonstrates the mutual assistance between friendly African countries to respond efficiently to natural disasters, particularly drought. Such a mechanism is beneficial for Madagascar as it will enable us to improve the conditions of farmers and the livelihoods of vulnerable populations in the 'Great South' that are victims of recurrent drought, as well as to preserve their production capital. Early interventions to be implemented with this fund will focus on unconditional cash transfer and Cash for Work (CFW) for 15,000 vulnerable households, nutritional support for 2,000 children under five years of age, and water supply for 84,000 households. Thus, this insurance mechanism supports the implementation of the National Disaster Risk Management Policy and Strategy, particularly the promotion of financial resilience to climatic hazards."

Madagascar faces disaster risks from an increasingly variable and changing climate, which add to the challenges of widespread food insecurity. 

UN-ASG Mohamed Beavogui, the director-general of African Risk Capacity said, “The payout made by ARC to support the drought-affected population in the Great South region was made possible thanks to the leadership and commitment of the government of Madagascar to protect its people. We also thank the AfDB for their laudable support through the ADRiFi programme. This is a vivid testimony that collaboration between African governments and development partners, both within and outside the region, using market approaches can go a long way in saving developmental gains on the continent.

“Our purpose in working with Member States to provide disaster risk insurance is targeted at promoting resilience and providing financial protection to the vulnerable population when perils occur”, remarked Lesley Ndlovu, the CEO of ARC Insurance Limited

“The insurance policy payout is timely, with Madagascar also facing the challenges of dealing with the current COVID-19 pandemic. It demonstrates that risk transfer programmes can help countries manage the risks of climate-related disaster and release pressure on public finances when multiple crises occur,” said Dr Jennifer Blanke, vice president for Agriculture, Human and Social Development, AfDB.

“Madagascar’s accession to the drought insurance mechanism as part of this ADRiFi programme is a very encouraging initiative. The collaboration between the Malagasy Government, ARC and the AfDB is still as fruitful in terms of developing a financial protection mechanism in the face of disaster risks. The sustainability of this tripartite collaboration will allow us to open doors of extensions to other risk areas of the country or even for other types of climatic hazards such as cyclones, floods and epidemics,” said General of Air Brigade Mamy Razakanaivo, Executive Secretary of the CPGU (Prevention and Support Unit for Emergency Management) within the Prime Minister's Office and Supervisor of the ARC programme in Madagascar.