Gallagher Re and ARC unveil parametric reinsurance product for drought in the Sahel

Gallagher Re and African Risk Capacity Ltd (ARC Ltd) have developed a new parametric reinsurance product for the UN World Food Programme (WFP) aimed at providing timely financial responses to populations affected by drought and food insecurity in the Sahel region.

Quantifying the impact of climate and weather on crops and livelihoods is challenging, making it costly to mobilise capital for uncertain extreme events. Accelerating humanitarian assistance to populations exposed to food insecurity in the Sahel requires a prompt response through efficient delivery mechanisms.

To address this, Gallagher Re and ARC Ltd have structured the Sahel Climate Catastrophe Layer (SCCL), a parametric product designed to trigger payouts only during the most severe regional droughts.

This innovative solution connects private sector capital with WFP’s country offices, enhancing the resilience of vulnerable communities facing food insecurity. The SCCL is projected to protect approximately 750,000 people from food shortages.

Utilising satellite data and advanced risk modelling technology, the SCCL enables quick payouts of up to $30 million to WFP offices in Niger, Mali, and Burkina Faso as soon as drought conditions are detected. This provides essential, time-sensitive funding for emergency responses, ensuring that every dollar reaches the most vulnerable populations through WFP’s efficient and transparent humanitarian systems.

The product is underwritten by ARC Ltd and backed by major international reinsurers.

Moreover, providing assistance during the early action window in the Sahel, from February to May, could lead to an average cost reduction of 20% for essential food items. The SCCL further strengthens WFP’s disaster risk finance instruments, prioritising speed of response while delivering cost-effective solutions for severe events.

This innovative parametric product was designed and implemented by Gallagher Re’s Public Sector, Parametric & Climate Resilience Solutions practice, which aids governments, re/insurers, banks, and businesses in managing their financial exposure to climate and disaster risks.

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