Floodbase has secured a grant from the US Agency for International Development (USAID) under the President’s Emergency Plan for Adaptation and Resilience (PREPARE) initiative to support the launch of parametric flood insurance programs in Mozambique and Malawi, in collaboration with African Risk Capacity Limited (ARC Ltd.) and Global Parametrics.
Floodbase, along with its partners, plan to develop parametric flood insurance programs that utilize satellite data and machine learning for rapid payout triggers, circumventing traditional claims processing challenges. This approach promises to deliver swift financial support to affected communities, fostering economic stability in the aftermath of floods.
The collaboration also aims to showcase the scalability and financial viability of parametric insurance in emerging markets, potentially extending this model to other agricultural risks across Africa. Bessie Schwarz, CEO of Floodbase, highlighted the partnership’s goal to bridge the insurance gap in Africa and scale the approach to enhance farmers’ resilience to climate change.
“Our collaboration with Global Parametrics, ARC Ltd., and USAID is an excellent blueprint for bringing new parametric flood products to market; USAID funding the development of the programs derisks the venture, both risk-transfer partners will ensure the programs are financially sustainable, and ARC Ltd. brings a wealth of local distribution expertise to ensure farmers can access policies,” Schwarz said.
In Mozambique, where over 80% of the population relies on agriculture, the vast majority of smallholder farmers in Africa lack insurance against agricultural risks, including floods. The challenge of accurately modeling flood risk and the high operational costs associated with claims management have historically hindered the development of viable flood insurance products in Africa.
However, the economic devastation caused by events like Cyclone Idai, which resulted in $700 million in losses, underscores the urgent need for innovative climate adaptation solutions.
USAID Administrator Samantha Power, speaking at COP 28 in the UAE, noted that Floodbase’s programs could have provided significant immediate financial relief to over 10,000 farmers in Mozambique following Cyclone Idai. This would have helped them avoid acute food insecurity and allowed for quicker recovery.
The PREPARE initiative, launched by President Biden in 2021, aims to assist vulnerable communities worldwide in adapting to climate change impacts. Through the Adaptation Finance Window of the USAID Climate Finance for Development Accelerator, Floodbase’s grant represents a strategic effort to employ private-sector led approaches in climate adaptation.
In December, Floodbase also partnered with Oneglobal for the enhancement of flood insurance offerings in Asia through parametrics.
What are your thoughts on this story? Please feel free to share your comments below.
