• Tuesday, February 27, 2024
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Risk transfer solution at scale will reduce climate change impact – Africa Re DMD

Risk transfer solution at scale will reduce climate change impact – Africa Re DMD

To tackle climate change and impact on food security, which has reinforced poverty among vulnerable populations in Sub-Sahara Africa, expert has recommended large-scale risk management solution.

Ken Aghoghovbia, deputy managing director/ COO, African Reinsurance Corporation made the recommendation in a presentation at the Africa Financial Industry Summit (AFIS) held in Lomé Togo

He said that extreme weather events such as floods and droughts are becoming common in sub-Saharan Africa and affect over 40 percent of the region’s population, impacting production of staples like maize, and rice thereby reinforcing the poverty cycle for the most vulnerable people.

Aghoghovbia noted that in Africa as whole, a risk transfer solution “at scale” is needed to address widespread flooding and droughts, especially for the most vulnerable regions.

“In this regard, insurers need reliable data about the prevalent exposure, the historical losses, and the vulnerability of the regions assessed.”

“This requires targeted modelling of these perils and constant monitoring using advanced technologies. This also requires a multi-stakeholder approach in light of the complexity of the problemgovernment, insurance industry, donor agencies, multilateral financial institutions, citizen groups, regulators and other stakeholders.”

Read also: Nigeria’s assets threatened as climate change global action debuts -Report

He also noted that there is need for embed catastrophe insurance into adaptive social protection systems

“ In 2022, while 61percent of global disaster losses were not covered by insurance, the protection gap in Africa was much higher at more than 90 percent. Therefore, Governments have to be encouraged to set up adaptive social protection systems that include an embedded natural catastrophe insurance solution.”

Aghoghovbia also advocated for multiple premium financing solutions, stating that for scalable insurance solutions, the ideal situation is that governments should finance the needed premiums, either from the national budget, donor grants or from contingent lines of credit. “Ultimately, this is much cheaper that post loss government expenditure.”

Other solution he noted include a strategic focus on the agricultural sector, pointing that this sector supports 55 percent to 62 percent of the labour force in sub-Saharan Africa alone, and that the continent’s agricultural productivity growth has declined by 34 percent since 1961 due to climate change, quoting WMO.

“The insurance industry therefore needs to put stronger focus on protecting the agriculture value chain – including crops and livestock systems. Governments should set up projects such as the L-Pres in Nigeria, and work with re/insurers to develop insurance protection. Again, this emphasises the need for co-creation of climate risk solutions with multiple stakeholders.”

Also focus on solutions that settle claims immediately is key. “We understand that the delays in claim settlement are directly responsible for the difficulties smallholder farmers, families and businesses face as they struggle to keep afloat.”