ARC to pay Kshs. 5.8B in claims to countries affected by drought

The African Risk Capacity (ARC) expects to pay Kshs. 5.8 billion ($50m) in claims to eastern and southern African countries to mitigate the effects of drought that is currently affecting the two regions.

ARC Chief Executive Officer Lesley Ndlovu says the insurer is currently assessing the impact of drought in the two regions before processing payments. While the government will not be entitled to the claims, the African Union specialised agency expects humanitarian organizations operating in the country to access the claims to address the situation.

“We estimate that we will pay $50 million in claims. The reason for the estimation is that for most countries in eastern and southern Africa, the agricultural season is still underway and is going to end in May or in June, so we will only know the full extent of the claims at that point because if the drought conditions in the country are getting worse then this increases the size of the claims and if they are getting better then this reduces the size of the claim,” said Ndlovu.

Eastern Africa is currently undergoing prolonged drought though this is expected to abate in the coming months should the region receive sufficient rainfall.

The drought has seen at least 28 million people left on the brink of starvation coupled with livestock losses.

According to Ndlovu the organization which provides insurance coverage to African countries for natural catastrophes such as droughts and floods has also expanded products to cater for humanitarian agencies and individual groups.

Among organizations expected to receive claims in this cycle is the Kenya Livestock Insurance Programme (KLIP).

Ndlovu says the claims assessment which is to be completed by June this year will provide immediate assistance, complementing exchequer and donor funds to help those affected by drought.

“Historically national disasters have been financed through the process of launching an international appeal and waiting for donors to intervene. The major drawback to this approach is that it takes a very long time for the funds to come in. What we are proposing through ARC is a more proactive approach where the cost of natural disasters is pre-finance via insurance such that when a disaster occurs we are able to pay the claim within 10 business days thereby providing governments with immediate liquidity to respond,” added Ndlovu.

ARC established in 2012 has so far paid out claims amounting to Kshs. 11.5 billion.

Kenya signed the Treaty in 2013 and participated in ARC drought risk Pools I and II through a total coverage of Kshs. 12 billion for total premiums of Kshs. 1.8 billion.

Kenya however halted buying premiums after drought severity of the 2016/17 season hit below the insurance attachment point and did not trigger the payment of a claim.