AfDB Addresses Climate Risk Financing, Insurance in Africa

By Dipo Olowookere

The African Development Bank (AfDB) has approved the Africa Disaster Risks Financing (ADRiFi) Programme, the institution’s first climate risk management programme to boost resilience and response to climate shocks in regional member countries.

The comprehensive programme, open to regional member countries, will enhance their ability to evaluate climate-related risks and costs, respond to disasters and review adaptation measures at both national and sub-national levels. It will also facilitate initial financing for countries in need of support. The programme’s initial phase is expected to run from 2019 to 2023.

The enhanced resilience and adaptation of countries to the negative impacts of climate change, as well as disaster risk insurance cover, will reduce the vulnerability of the poor to climate change and act as a safeguard against loss of livelihoods in communities, especially for smallholder farmers.

Nine countries have already expressed interest in participating in the programme– Burkina Faso, Chad, Gambia, Madagascar, Malawi, Mali, Mauritania, Niger and Senegal.

“Africa is the most vulnerable continent to climate change, prone to a wide variety of natural disasters including droughts, floods and tropical cyclones. However, disaster risk management suffers from inadequate financing and challenges in the deployment of available funds”, said Atsuko Toda, Bank Director for Agricultural Finance and Rural Development.

“This programme is a significant step to help reduce exposure and vulnerability of African countries, and will create a system to absorb, adapt and aid recovery of these countries from climate shocks,” Toda said.

ADRiFi will promote disaster response mechanisms such as sovereign parametric index-based insurance, for which payouts will be disbursed automatically and in timely manner when a pre-defined risk threshold is exceeded.

It is estimated that every $1 spent on ex-ante intervention through the programme will save $4.40 in ex-post disaster relief measures for a response carried out six months after the event.

The ADRiFi programme is directly aligned with the Bank’s ‘High 5’ priorities, particularly “Feed Africa” and “Improving the Quality of Life of Africans”. It is also aligned with the Bank’s Climate Change Action Plan II (2016-2020) policy.

The Bank has signed a Memorandum of Understanding with The African Risk Capacity to cooperate in preparing, developing and implementing projects and programmes in climate change and risk resilience in member countries. As a key partner, ARC will assist member countries with policies on drought risk pools and other sovereign disaster risk measures.