Zambia’s ARC parametric drought insurance to payout US $5.3m

The African Risk Capacity (ARC) has paid out and already disbursed US $5.3 million to the Government of Zambia after the African nations parametric drought insurance coverage was triggered.

A symbolic US $5.3 million cheque was presented to the Zambian Government by representatives of the African Risk Capacity Group and the African Development Bank, with the payout set to help the country’s recovery from the extreme drought experienced during the 2021/2022 agriculture season.

The parametric insurance payout is expected to help Zambia carry out respond better and faster to communities affected by drought, through the provision of cash transfers and food assistance, helping to make sure food is available for the targeted households during the lean season period.

Zambia’s Acting President, Her Honour W.K Mutale Nalumango, welcomed the payout from ARC to the Republic of Zambia, and said the parametric insurance payout would provide relief and livelihood reconstruction funding to benefit the most vulnerable households impacted by the 2021/22 drought.

“With the national treasury experiencing unlimited demand for the provision of public goods and services, the government stands ready to support disaster risk transfer initiatives that lighten the burden on government. I urge other organisations such as the World Food Programme and other international and local civil societies to come on board to help expand the ARC insurance coverage in Zambia by partnering with my government to take up replica and micro insurance,” the Acting President explained.

During the 2021 and 2022 growing season, a substantial lack of rain affected crop production and resulted in severe food insecurity in districts in the southern and western parts of Zambia.

The Zambian Government was assisted by premium financing support from the Swiss Agency for Development and Corporation and the African Development Bank in order to maintain the parametric drought insurance policy for the 2021/22 agriculture season.

“The African Development Bank is pleased to see this African Risk Capacity Group payout to the Government of Zambia. We expect this to be the beginning of continued support to help the country enhance their resilience to the shocks of climate change. The Bank’s support has brought assistance to farming communities hit hard by drought and poor crop yields, by enabling Zambian authorities to provide them with cash payments and sustaining them from eating their seeds as food, quitting farming as livelihoods, or migrating in search of food and non-existent jobs,” AfDB Vice President for Agriculture, Human and Social Development, Dr. Beth Dunford said.

“ARC offers an African solution to one of the continent’s most pressing challenges, the shocks of climate change, transferring the burden of climate risks away from governments to ARC through sovereign insurance,” added Dr Abdoulie Janneh, ARC Group Deputy Board Chair and ARC Ltd Board Chair. “The Government of Zambia is our privileged partner, and we stand with them to ensure their vulnerable population and livelihoods are protected against extreme weather-related disasters.”

“We are extremely honoured by the trust vested in us by the Government of Zambia. We are confident that this payout will assist the country in supporting its affected population to recover from the effects of the drought and prevent them from resorting to negative coping mechanisms,” United Nations Assistant Secretary-General and ARC Group Director General, Ibrahima Cheikh Diong also said.