> African Risk Capacity:
Africa Takes the Lead in Managing Climate Risk Climate negotiations in Paris last year focused the world’s attention on the fact that Africa’s vulnerable populations will be shouldering most of the burden of rising temperatures despite having barely contributed to global greenhouse gas emissions.
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reater rainfall extremes and higher temperatures tied directly to climate change may start impacting vulnerable countries across the continent, in the form of more frequent and severe weather-related disasters. These disasters have a devastating impact on the agricultural sector in Africa which employs about two-thirds of the continent’s labour force and a majority of the rural poor. When a natural catastrophe strikes, lives are lost, assets are depleted, and development gains are reversed, forcing more people into chronic hunger, malnutrition, and destitution. Extreme weather events can force thousands of people to leave their homes for good and to sell or slaughter the livestock on which their livelihoods depend. This deepens poverty cycles and, at worst, can reverse an entire decade of development progress. It also contributes significantly to transnational and transcontinental migration. While the international community has done much to help respond to natural disasters in Africa, funding is secured on a largely ad hoc basis and rarely matches what is required. By the time emergency relief is mobilised and actually reaches affected populations, much of the damage has been done. The World Bank Group warned that 100 million more people would be driven into poverty by 2030 if nothing is done to curb the impact of climate change. The international community
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“ARC uses weather information, such as satellite rainfall or cyclone track and intensity data, to accurately estimate the hazards associated with severe weather events and their impacts on communities.” has been repeatedly called upon to honour the differentiated responsibility for global warming and to drive the necessary adaptations to control its impact. But it is Africa itself which has taken the lead in bringing together one of the most collaborative and innovative solutions to extreme weather risk and climate change yet. The continent is harnessing the powerful tools of risk assessment, management, and transfer, already used in developed countries through insurance, to shift some of the burden of climate risk to the international financial markets, where it can be more efficiently managed. African governments have joined together through the African Risk Capacity (ARC) to create a continent-wide risk management system which includes integrated early warning, risk reduction through contingency planning, and risk transfer through a catastrophe risk pool.
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ARC was established in 2012 through a collaboration of 18 African Union member countries which has now grown to 32. It is made up of two entities, the ARC Agency, a Specialised Agency of the African Union and its financial affiliate, a mutual insurer capitalised by the UK and German governments with interest-free loans which to date total $95m. ARC uses weather information, such as satellite rainfall or cyclone track and intensity data, to accurately estimate the hazards associated with severe weather events and their impacts on communities. ARC member countries participating in the risk pool pay annual premiums based on the frequency and severity of impacts and the maximum payout amount required. An insurance pay-out is triggered when a pre-agreed level of impact is reached in a participating country, based on ARC’s early warning and risk modelling platform, Africa RiskView (ARV). The pay-out increases with the scale of the impact. The funds support the implementation of pre-certified contingency plans, a prerequisite for taking out an insurance policy, which ensure quick and direct assistance to vulnerable communities. ARV’s early warning component allows authorities