“Code Red” — Risk-sharing offers a workable solution for African countries

Op-Ed by Lesley Ndlovu, ARC Limited CEO

African Risk Capacity Group
5 min readSep 15, 2021

Alarm bells have continued to ring around issues of climate change following the recent release of the Intergovernmental Panel on Climate Change (IPCC) report, UN Secretary-General António Guterres said spelt out a “Code Red” for humanity.

And while he pointed out that there was hope if countries worked together to mitigate risk, he highlighted there was no time to lose in “acting decisively”.

“The internationally agreed threshold of 1.5°C is perilously close. We are at imminent risk of hitting 1.5°C in the near term. The only way to prevent exceeding this threshold is by urgently stepping up our efforts and pursuing the most ambitious path,” Guterres said.

Taking an African focus

The media narrative may be centred around the ice caps melting and getting very little airtime in South Africa, as this article by Steven Friedman suggests, however the IPCC report confirms that continued drought in Africa, among other climate change consequences, will directly affect vulnerable communities.

Issues such as marine heatwaves, increased coastal flooding and the severity of coastal erosion, as well as decreases in rainfall in some areas and the intensity of “heavy precipitation events” in other areas all pose a threat, as does the expected increase in flooding. The report also points to prolonged droughts as have already been seen in West Africa, Central Africa, Eastern Southern Africa, West Southern Africa, and Madagascar.

It was not the first warning. Earlier this year, the UN warned that drought may well be the next pandemic, according to the GAR Special Report on Drought 2021.

Indeed, the African Development Bank Group had already highlighted the impact of climate change in its COP25 report, saying: “Africa is the most vulnerable continent to climate-change impacts under all climate scenarios above 1.5°C.

“Despite having contributed the least to global warming and having the lowest emissions, Africa faces exponential collateral damage, posing systemic risks to its economies, infrastructure investments, water and food systems, public health, agriculture, and livelihoods, and threatening to undo its modest development gains and slip into higher levels of extreme poverty.”

Managing the risk for African countries

Despite the urgency, African policymakers tend to treat environmental issues as “low politics” because climate change is “transboundary, intractable, irreducible and occurs over long time-scales” as explained by Dr Ekeminiabasi Eyita-Okon, a postdoctoral research Fellow at the Centre for Africa-China Studies at the University of Johannesburg.

However, there is more than enough evidence for this to change, and for African governments to put environmental issues at the top of the agenda by adopting a collaborative approach to finding solutions.

One such example of collaboration in the climate change risk mitigation space is African Risk Capacity’s sovereign risk pooling approach through which countries are added to a “risk pool” where they are insured as a collective and assisted when they individually need to respond to the devastating effects of climate change-induced events, such as a drought, flood or tropical cyclone for example.

Sébastien Kouame Koffi, an ARC beneficiary in Ivory Coast. ARC/Simon Pierre Diouf

The fundamental risk-pooling mechanism that underlies ARC has been recognised at the highest levels of climate negotiations as a new and important tool for countries to utilise.

ARC Limited provides an insurance mechanism that supports the implementation of the National Disaster Risk Management Policy and Strategy, particularly the promotion of preparedness and financial resilience to climatic hazards. Our purpose in working with African governments to provide disaster risk insurance is targeted at promoting resilience and providing financial protection to the vulnerable population when perils occur.

We encourage countries to take a risk-layering approach where they set aside money in the annual budget to deal with recurring high-frequency, low-severity droughts. As the severity increases and frequency decreases, states then have mid-level parametric insurance as a contingency that can be disbursed quickly before the crisis becomes unnecessarily severe.

It takes far too long for African countries to mobilise the immediate resources they need for relief efforts, to save lives and livelihoods. The traditional disaster response is extremely slow and inefficient and, by the time governments and NGOs have raised enough money to respond meaningfully, the problem has become much worse and more funding is needed.

The role of insurance is therefore critically important in building resilience and ensuring a country can bounce back quickly after a natural disaster.

We also see a tangential benefit of insurance arising from increasing sophistication of countries and enabling them to better understand risk. To be in a position where one can understand which of the risks one wants to retain versus which one wants to place in the international insurance markets, one needs to develop a sophisticated and nuanced understanding of risk.

While the IPCC report certainly was a wake-up call for many nations, climate activists point out that the science remains the science — they have been saying it time and time again that the time for action is right now.

Guterres stresses that leaders from civil, society, business and governments all need to step up to limit global warming, citing that it is the most vulnerable countries and nations that will be hardest hit by the climate emergency — which means the African continent is on the frontline of the climate crisis.

ARC and its partners Plan International And KFW meet with the Governor of Thies, in Senegal. ARC/Simon Pierre Diouf

“The solutions are clear,” says Guterres. “Inclusive and green economies, prosperity, cleaner air and better health are possible for all if we respond to this crisis with solidarity and courage.”



African Risk Capacity Group

Specialized agency of the African Union providing comprehensive sovereign disaster risk solutions to build capacity, climate resilience & food security.