Representatives from the African Risk Capacity (ARC) Group and the African Development Bank presented two symbolic cheques to the Government of the Republic of Madagascar and World Food Programme for a combined insurance payout of $1.5 million to support the country’s recovery from Tropical Cyclone Freddy. This payout includes $1.2 million to the Government of Madagascar and $300,000 to the World Food Programme through the ARC Replica initiative. The strong winds and heavy rains associated with cyclone Freddy, which made landfall on Madagascar’s east coast on February 21, is another disaster event that devastated the country. The tropical cyclone displaced thousands of people and resulted in the loss of lives and livelihoods initially estimated at $481 million.
In her speech, Mrs Rindra Hasimbelo RABARINIRINARISON, Minister of Economy and Finance said; “We are aware that Madagascar is prone to climate disasters, the frequency and intensity of which have continued to increase in recent years. The damage caused is more violent and the related costs are increasing. As such, the Malagasy Government is ready to take the necessary measures to continue its commitment to ensuring the sustainability of this insurance mechanism as an instrument that is adapted to the context of the country’s vulnerability to climate hazards.” She also stressed that “Madagascar, like many African countries, requires special support to strengthen resilience to climate change, especially as we are not perpetrators of the pollution that causes this scourge. We are at war, not amongst ourselves, but against climate change”.
As part of building resilience to the impending threat of cyclonic events, the Government of Madagascar and the World Food Programme took out two separate tropical cyclone insurance policies during the 2022/2023 cyclone season with ARC Limited, the insurance affiliate of the ARC Group, responsible for risk pooling and transfer. The country’s participation in the ARC risk pool was made possible by premium support from the Africa Disaster Risk Financing programme, a collaborative initiative between the Bank and the ARC Group, also known as ADRiFi. ADRiFi is designed to enable qualifying African governments’ participation in ARC risk pools. Contributions from the Governments of the United Kingdom and Switzerland, through the ADRiFi Multi-Donor Trust Fund managed by the Bank, subsidised the insurance premium payments.
Commenting on the ceremony, Lesley Ndlovu, Chief Executive Officer of ARC Limited, said, “We are delighted to be making this payout to the Government of the Republic of Madagascar to reach the most vulnerable communities and help the country rebuild. Our work with Madagascar over the years continues to prove the value of sovereign insurance as a valuable tool to strengthen a country’s resilience to weather-induced threats.”
This payout comes as Madagascar rebuilds from a series of costly climate-induced disaster events that have eroded some of the country’s development gains and is critical aid for the island nation’s recovery efforts from Tropical Cyclone Freddy. ARC’s Tropical Cyclone Explorer (TCE), an online platform that calculates the number of populations affected and the economic losses caused by a cyclone event, modelled and assessed the estimated economic losses.
As of 10 March 2023, Madagascar’s National Bureau of Risk and Disaster Management (BNGRC) reported ten cyclone-related deaths, more than 120,000 people affected, with at least 45,000 people displaced, and more than 10,300 houses and schools destroyed.
“The AfDB, through the ADRiFi programme, supported the Malagasy Government to pay insurance premiums of $3.5 million. These subscriptions generated a total disbursement of $15 million from the ARC Group in the form of payouts. It is gratifying to know that the amount mobilised is more than 4 times greater than that paid in premiums, and even better, it has benefitted 385 589 vulnerable households who have been affected by droughts and tropical cyclones. I would like to reiterate the commitment of the AfDB to support the Government and the people of Madagascar in the effort to combat the harmful effects of climate change”, said Mr. Ada Amoumoun, AfDB Country Manager.
In line with ARC’s contingency planning process that stipulates the use of the payout, the funds will assist cyclone-affected communities, aiming to reduce incidents of impacted communities resorting to eating agricultural seeds as food, selling farm tools or migrating in search of work and food. These pre-approved plans ensure that there is a strategy for the rapid use of an insurance payout and prevent desperation by affected populations.
“More frequent and more intense climate shocks exacerbate the vulnerability of people, especially in the south and east regions of Madagascar. While WFP is providing timely assistance to affected people, we are also eager to use our experience and expertise to shape longer-term solutions in Madagascar to strengthen people’s resilience”, says Pasqualina Di Sirio, WFP’s Representative in Madagascar. “WFP supports insurance schemes and subsidies to affected people to contribute to bolster people’s ability to face the climate crisis”, she adds.
Speaking at the payout ceremony, Ibrahima Cheikh Diong, UN Assistant Secretary General and ARC Group Director General said, “As we rally around the Government of Madagascar and its people in their time of need, we are once again reminded of the need for a collaborative effort to fight climate change. It is the cyclical nature and the increase in frequency and intensity of such disaster events that compounds the devastation. This demands that we work even harder to strengthen Africa’s capacity to respond and avail important tools such as early-warning systems to complement other efforts.”
The Government of the Republic of Madagascar was the first country to enrol in the ARC Tropical Cyclone insurance programme since its launch in November 2020. During an active cyclone, ARC provides daily, real-time monitoring information on the strength and potential impact zones of the cyclone to help participating countries evacuate people in harm’s way. This warning system enabled Madagascan authorities to evacuate 7,000 people ahead of Cyclone Freddy’s landfall.
Commenting on the handover ceremony, the ARC donor group that has been instrumental in subsidising participation in ARC risk pools, echoed the same sentiment; “Our hearts go out to the people of Madagascar who have been affected by Cyclone Freddy.” This payout is the result of collaborative efforts from multiple stakeholders to build Madagascar’s resilience against the ravages of tropical cyclones. We reiterate our commitment to continue to support ARC in strengthening national capacities and community resilience in response to the growing climate threat.”
In 2022, ARC Group issued a payout of $10.7 million to Madagascar, following Tropical Cyclone Batsirai, another deadly cyclone that made landfall in Madagascar in February 2022.