African Risk Capacity to Develop Outbreak and Epidemic Insurance for African Sovereigns

The African Union’s African Risk Capacity – the continent’s sovereign disaster risk insurer – is developing cover for disease outbreaks and epidemics. In the aftermath of the Ebola crisis that ravaged West Africa last year, ARC Member States requested the development of these services at this week’s African Union Summit in Addis Ababa.

“While pricing models will be more complex than in ARC’s existing drought product, and flood and tropical cyclone modeling, product development is feasible and will reflect true risk. We aim to insure the first four participating states in 2017,” said Dr. Richard Wilcox, ARC’s founding Director General. As in the case of natural disasters, outbreaks create immediate funding requirements for African governments, which traditional foreign aid only addresses in an ad hoc and often untimely manner.

New applications of financial tools like insurance can significantly improve the speed of funds availability and shorten the time lag between event and response. “Ebola is not the first virus to threaten the world, and it won’t be the last. Unless we prepare for the next epidemic, we will find ourselves forever nailing down outbreaks just in time to see the next ones pop up. Epidemic risk financing is going to be a key component of the overall preparedness and risk management strategy. We are working with regional organizations such as ARC, global organizations as well as financial institutions in providing analytics and instutiontal knowledge required to architect such financing schemes.” said Dr. Nathan Wolfe, founder and CEO of Metabiota, the pioneer in the analytics, management and mitigation of epidemic threats.

ARC provides funding against African governments’ peer-reviewed and approved contingency plans for drought. A similar approach would be necessary for outbreaks and epidemics. “African Risk Capacity is an example that we should look at as part of our success stories. Firstly, this is pooled resources of Member states to address an African problem; secondly they work to strengthen capacity in Member states; and thirdly they have already started paying out to Member states facing drought this year,” said Dr. Nkosazana Dlamini-Zuma, Chairperson of the African Union Commission in her opening speech to the AU Summit last week.

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