NDF supports ARC as lead capacity provider for parametric drought insurance for UN food program

The Natural Disaster Fund (NDF), managed by Global Parametrics, is playing a crucial role in supporting food security in drought-prone African countries by supporting African Risk Capacity Ltd. (ARC) with risk capacity for the UN World Food Program (WFP).

In the Central Sahel region of Burkina Faso, Mali, and Niger, annual rainfall is essential for both food security and economic stability. Slight changes in precipitation can have devastating consequences, pushing millions into hunger and poverty.

As the lead provider of risk capacity for the Sahel Climate Catastrophe Layer (SCCL), the NDF plays a pivotal role in ensuring that payouts are swiftly released during severe drought events that breach a predetermined index value.

The parametric product leverages satellite data and advanced risk modelling, and was structured and placed by Gallagher Re and ARC Ltd.

Managed by Global Parametrics, the NDF is a collaborative effort between public and private sectors, receiving financial backing from the governments of the UK and Germany.

By partnering with Hannover Re, the NDF is able to offer parametric insurance products that protect vulnerable communities in developing countries against the impacts of climate change and natural disasters.

This helps build climate and NatCat resilience for poor and vulnerable communities in low-and-middle-income countries across the Global South.

According to the announcement, the second phase of the Sahel Integrated Resilience Programme, a joint effort by the WFP, governments, and partners, is underway.

The scale-up plan aims to reach 5 million people and provide essential support to vulnerable communities in the Sahel region. The NDF risk capacity transaction will offer crucial protection for up to 1 million WFP beneficiaries.

“We are grateful for the trust placed in the NDF and Global Parametrics as this transaction brokered by Gallagher Re demonstrates how parametric climate insurance can contribute to building resilience as well as delivering humanitarian relief for communities facing climate-driven crises,” a spokesperson commented.

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