ARC makes $5.4m parametric payout to support Mozambique’s climate disaster response

In response to recent climate disasters, the 2024/25 drought and Tropical Cyclone Chido, the African Risk Capacity (ARC) Group made a combined parametric insurance payout of $5.4 million to the Government of the Republic of Mozambique and the World Food Programme (WFP).

The Government of Mozambique received just over $1.8 million for drought response. The WFP, which took out 2 insurance policies for drought and tropical cyclone on behalf of the country through the Replica programme, received $400,000 for drought and $3.1 million to support response to Tropical Cyclone Chido.

ARC’s Replica programme allows UN agencies and other humanitarian actors to match ARC country insurance policies.

Due to its geographic location, Mozambique is highly prone to seasonal cyclone and cyclical drought events which compound food insecurity and destroy key infrastructure, displacing many.

The insurance payout will support crucial, life-saving interventions, specifically large-scale food distribution, for communities impacted by climate-related shocks.

This disbursement, ARC stated, highlights the importance of parametric insurance in fostering resilience and enabling prompt, pre-planned responses to the growing frequency and intensity of these events.

David Maslo, ARC Ltd Interim CEO, stated: “This payout demonstrates the value of ARC’s parametric products, which deliver fast and predictable finance when needed most.

“ As a Class A Member of ARC, Mozambique not only benefits from insurance that keeps coverage affordable but also has the assurance that an AU-mandated institution will continue to support it against climate shocks. This is what sets ARC apart: an African-led solution that works, combining innovation, solidarity, and resilience for our Member States.”

Albertina Fruquia Fumane, Permanent Secretary in the Minister of Finance, expressed the Government’s appreciation to be receiving this payout. She commented: “The insurance is an important defence line to protect the lives of the most vulnerable by reducing fiscal and social vulnerability.

“The Government has been investing in strengthening its capacity to respond and building resilience, and in the development of guiding instruments.”

Mozambique’s participation in ARC risk pools was made possible by an insurance premium paid in part by the government, with premium support contribution from the Africa Disaster Risk Financing Programme ADF Fund (ADRiFi-ADF). ADRiFi is a framework developed as a collaboration between the African Development Bank and the ARC Group.