The African Risk Capacity (ARC) is a sovereign risk pool established in 2012 in response to Africa’s increasing frequency and severity of natural disasters. Previously, there was an absence of pre-arranged financing tools.

Operating at the macro level, ARC Limited is a mutual insurance facility providing parametric risk transfer services to African countries through risk pooling and access to reinsurance markets.

ARC has received the global insurance industry’s top overall ESG score. It is also the first African company to join the UN-convened Net-Zero Asset Owner Alliance; committing itself to adopting a holistic approach to managing sustainability considerations, such as climate change, and to advocate for corporate and industry action aimed at a low-carbon transition of economic sectors.

ARC pay-outs are distributed by Governments according to a pre-agreed Final Implementation Plan. An audit is conducted post pay-out to ensure the expected standards have been met. 35 countries are eligible to be a member of ARC.

Along with its partners, which provide premium support, the insurer has already paid out close to USD 120 million so far, providing drought relief and address the economic concerns these countries’ most vulnerable citizens face.

There is a 97% protection gap in Africa when a natural disaster occurs. To reduce this, micro-level products will need to play a big part, alongside meso- and macro index insurance products. Multiple partners will also need to be involved, not just governments.

There are strong growth targets for the next five years based on the significant opportunities that exist in the market to leverage One ARC to cover 150 million Africans. This would require growing into a USD 100m insurer that better builds the resilience of the most vulnerable people in Africa.