Breaking new ground: Climate insurance solutions for refugees and host communities in Africa

Refugees and internally displaced persons (IDPs) have historically been excluded from financial services, especially insurance. This exclusion is also a significant challenge in climate negotiations and in ensuring climate finance reaches the most vulnerable populations. However, for the first time, the African Risk Capacity (ARC), a specialized agency of the African Union, and UNHCR, the UN refugee agency, through its ARC Replica program are tailoring insurance services specifically for refugees and displaced people.

ARC offers seasonal parametric insurance to African countries to mitigate and prepare for climate risks, and ARC Replica extends this insurance to humanitarian organizations, covering part of the country’s remaining uninsured risk. This development marks the first insurance scheme ever designed to protect refugees and IDPs against the adverse impacts of climate change. The success of ARC and ARC Replica, which has expanded to 39 countries across Africa, highlights the potential for sovereign insurance to address these needs.

While ARC parametric insurance, with its distinctive and novel approach, is gaining traction and expanding its reach, it remains not well understood by many.

On May 21-23, 2024, a UNHCR-ARC Learning and Planning Workshop was held in Pretoria, South Africa, to further explore and expand this initiative. The workshop included participants from ARC, UNHCR, CGIAR, the World Food Programme (WFP), and the Start Network. During the event, ARC officials detailed the workings of their parametric insurance products and how they are triggered,

Officials from WFP, Start Network and UNHCR also shared their experience with ARC Replica insurance. On the second day, CGIAR presented its expertise on climate data, and its application to displacement settings.

In addition to providing relevant climate data, CGIAR is excited to support the ARC Replica insurance team by seconding Siyaxola Gadu, a climate risk expert, to UNHCR. This move continues the significant CGIAR-UNHCR partnership established and the MoU signed earlier this year. This support is expected to enhance UNHCR’s capacity and contributions to the Technical Working Groups, which play a key role in setting trigger points for the ARC Replica insurance policy. CGIAR’s timely assistance is crucial as UNHCR plans to expand the ARC Replica policy from Malawi to four other African countries.

Authors: Siyaxola Gadu, Peter Laderach, Ibukun Taiwo (Alliance of Bioversity International & CIAT)

Top Photo: Refugees, internally displaced people and host community join forces on market garden project in Niger. © UNHCR/Colin Delfosse