3 INTEGRATED ANNUAL REPORT 2023 CELEBRAT I NG A DECADE OF I MPACT
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01 42 OUR MATERIAL MATTERS AND RISKS 46 A LANDMARK US$11.7 MILLION PARTNERSHIP FOR FOOD SECURITY IN AFRICA 48 PARTNER INTERVIEW: UNHCR 50 NON-SOVEREIGN BUSINESS: MALAWI 52 NON-SOVEREIGN BUSINESS: DJIBOUTI 54 NON-SOVEREIGN BUSINESS: CÔTE D’IVOIRE 62 MEMBER STATE INTERVIEW: MALI 64 CHIEF OPERATING OFFICER’S REPORT, ANGE CHITATE 67 FACILITATING DIALOGUE BETWEEN MEMBERS AND PARTNERS 70 CHIEF UNDERWRITING OFFICER’S REPORT, MALVERN CHIRUME 74 DONOR PARTNER INTERVIEW 76 SAFEGUARDING VALUE 82 OUR BOARD MEMBERS 85 OUR EXECUTIVE MANAGEMENT TEAM 87 AUDITED FINANCIAL STATEMENTS 02 ABOUT THIS REPORT 03 2023 HIGHLIGHTS 06 2023 IN REVIEW 07 LEADERS IN BUSINESS, NURTURING AFRICAN TALENT AND INNOVATION 09 WHO WE ARE 10 OUR VALUES 11 OUR CAPITAL CLASSES 12 OUR FOOTPRINT 13 OUR MEMBER STATES 14 OUR OPERATING ENVIRONMENT 15 MESSAGE FROM THE CHAIRMAN, MR. ABDOULIE JANNEH 16 CREATING VALUE 18 REPLICA PARTNER INTERVIEW: START NETWORK 20 RESILIENCE-FOCUSED RECOVERY AND RECONSTRUCTION (ESG) 26 MESSAGE FROM THE CEO, LESLEY NDLOVU 29 OUR STRATEGY 33 OUR BUSINESS MODEL: GEARED FOR VALUE CREATION 36 REPLICA PARTNER INTERVIEW: WFP TABLE OF CONTENTS 56 CASE STUDY: SENEGAL 40 HIGHLIGHT: NURTURING AFRICAN TALENT AND EDUCATION 60 HIGHLIGHT: PAYOUTS IMPACT 79 10TH ANNIVERSARY: HIGHLIGHTS FROM THE PAST 10 YEARS ARC ANNUAL REPORT 202 3 - CE L EBRAT I NG A DECADE OF I MPACT 22 HIGHLIGHT: ARC LTD.’S ADVOCACY IN AFRICA AND BEYOND
02 ABOUT TH I S REPORT ABOUT THIS REPORT This 2023 Integrated Annual Report summarises our progress, impact, priorities, and outlook. It explains how we generate short-, medium- and long-term value while upholding best practices in commercial insurance and sustainable development. We have aimed to provide a focused overview of the past year alongside our strategy, operating context, and impact for all our stakeholders. Report Parameters This report covers ARC Ltd.’s operations and activities for the 2023 financial year ending 31 December. It concentrates onmaterial issues relating to our strategic direction, business model dynamics and external landscape. The report records our key activities and payouts over the last 12 months and reflects our foremost risks, goals, and highlights. Reporting Framework This integrated report aligns with the International Sustainability Standards Board’s requirements and principles. Our audited Annual Financial Statements comply with International Financial Reporting Standards (IFRS) and regulations set by the Bermuda Monetary Authority (BMA). Materiality We have disclosed all material issues in this report, outlined in this report. We judge a matter to be material if As an organisation dedicated to pioneering climate change risk solutions across Africa, transparency and accountability are core principles for African Risk Capacity Limited (ARC Ltd.). We combine traditional approaches to risk management (such as mitigation, disaster relief and quantification) with risk pooling and risk transfer to create sustainable, African-led strategies for managing extreme weather events, disasters, and disease outbreaks. it influences investment decisions, is relevant to partners and stakeholders, impacts strategic choices or could affect mandate delivery. We determined material issues by reviewing our Inclusive Growth Strategy; our Six Capitals; environmental, social and governance practices; and stakeholder feedback on their expectations and concerns. Forward-looking Statements This report contains forward-looking statements regarding our long-term strategy, financial projections, and operating backdrop. However, our dynamic environment means actual future performance could diverge from these statements. As unknown factors could emerge to shape results differently, the forward-looking statements have not been reviewed or assured by our auditors. We hold no obligation to update them publicly beyond this report’s date. Accountability ARC Ltd.’s executive leadership and reporting team take responsibility for producing this integrated report and financial statements under prevailing regulations and reporting principles, such as the International Sustainability Standards Board’s Integrated Reporting Framework. The Board of Directors and its audit, finance and risk subcommittee also affirm their accountability for ensuring report integrity.
03 202 3 H I GHL I GHTS New Replica partner the UN Refugee Agency WELCOMED Africans insured through Pool 10 The written premiums for Pool 10A, the largest-ever Pool A in history Burkina Faso, Côte d’Ivoire and Senegal rejoined the pool 2023 HIGHLIGHTS Our gross written premiums M I L L I O N $56.1 26.4M 13.4M $25.2M REJOINED Income statement: Djibouti: Multi-year, multi-peril product Africa: First-ever flood risk product LAUNCHED M I L L I O N Total claims paid out since 2014 +$170 The number of people in Africa covered for drought by Pool 10A M I L L I O N Paid out to Pool 9 $18.5 $13M Profit in 2023 $29M Loss in 2022 Gross earned premium of $46.8 million
04 TEN-YEAR REVIEW TEN - YEAR REV I EW 2021 2023 2024 2019 2022 2020 • Total claims paid: $18.5 million • Number of people covered: 26.4 million • Burkina Faso, Côte d’Ivoire and Senegal rejoined the pool • Two African firsts: a multi-year, multi-peril product for Djibouti and a flood risk product +$16 million in total paid to Replica Partners in 2019 and 2020 • $26 million received by Senegal Côte d’Ivoire, Madagascar & Zimbabwe • Funds were used for early action to support more than 7 million drought-affected people in the 2019 agricultural season. • Number of payouts: 14 • Total claims paid: $60 million • Number of people covered: 18 million • Somalia and Comoros joined the pool • Africa’s first-ever flood risk, and outbreaks and epidemics products launched • Contingency fund created to cover risks below the insurance attachment points • $28 million in drought claims paid to Senegal, Madagascar & Zimbabwe • Tropical cyclone product launched • Gross written premiums increased by 30% from 2019 CELEBRATING 10 YEARS IN 2023 PAYOUTS WERE DISBURSED TO THE FOLLOWING COUNTRIES: NIGER $4.6 million Prolonged dry spells MADAGASCAR $797,049 Drought MALI $5.3 million Food assistance (WFP Replica partner) • $14.2 million drought claim paid to Malawi • Gross written premiums increased by 46% • Number of payouts: 14 totalling $59.6 million • $21.7 million drought claim paid to Mali • $10.7 million tropical cyclone claim paid to Madagascar
05 TEN - YEAR REV I EW 2016 2018 2014 2017 2015 • $4 million payout to Mauritania – the first of its kind received by that government in response to progressively severe drought. • Funds also subsidised livestock reserves. • Number of payouts: 4 • Total claims paid $26.3 million • Countries that received payouts: Kenya, Mauritania, Niger, Senegal • Number of people covered: 12.9 million • $8.1 million payout to Malawi from a premium of $4.7 million • Funds were used to support 800 000 Malawians, to scale up cash transfers and replenish strategic grain reserves. • $26.3 million paid to Mauritania, Niger and Senegal • Payout benefited an estimated 1.3 million people and 500 000 livestock. IN 2023 PAYOUTS WERE DISBURSED TO THE FOLLOWING COUNTRIES: TOGO $2.5 million Drought SOMALIA $3.38 million Drought (Start Network Replica Partner) THE GAMBIA $187,641 Food assistance (WFP Replica partner) • Number of payouts: 6 for Pool 3 • Countries that received payouts: Burkina Faso, The Gambia, Mali, Mauritania, Niger, Senegal • Number of people covered: almost 9.5 million
06 202 3 I N REV I EW 2023 IN REVIEW We achieved gross written premiums amounting to $56.1 million (gross earned premiums of $46.8 million) and a net income of $14.2 million. Our non-sovereign business grew exponentially with the total gross written premium amounting to $14.78 million. The significant growth can be attributed to the addition of these policies: • The World Bank Malawi social protection – gross premium of $10.25 million for the two-year policy was received in 2023. • The World Bank Republic of Djibouti – gross premium of $2 million for the five-year policy was written in 2023. • Drive Pool 9 endorsement policies – gross premium of $1.45 million was received in 2023. We renewed the World Food Programme-Madagascar policy for both seasons and retained a 95% share. We also renewed the One Acre Fund Kenya policy and increased our share from 4% to 10%. We continued to innovate and diversify, launching two firsts in Africa – our flood risk product and a multi-year, multi-peril product for Djibouti. Furthermore, we strengthened our partnerships and contributed to important projects, such as co-designing an innovative insurance product with the Malawi Government and continuing to coordinate the massive agricultural protection project in Côte d’Ivoire, to provide coverage for 5 000 rice and cocoa producers, which saw the World Food Programme coming on board. Due to increased business demands and volumes, it was necessary for ARC Ltd. to expand in 2023. While in previous the years, we had been able to close skills gaps with an agile and flexible team that did more that their defined role requirements, with growth this ceased to be sustainable. We hired several senior experts to increase our capabilities and deliver even better on our mandate. We prioritised recruiting critical skills in our underwriting team and created additional roles to serve grant-specific activities following our first grant from the US government. We celebrated a massive business turnaround as we returned to profitability, achieving a net profit of $13 million from a $29 million loss in 2022. Pool 10A became our largest risk pool to date, with $25.2 million in written premiums. We covered 26.4 million people across Africa and paid out $18.5 million in claims.
07 L EADERS I N BUS I NESS , NURTUR I NG AFR I CAN TAL ENT AND I NNOVAT I ON LEADERS IN BUSINESS, NURTURING AFRICAN TALENT AND INNOVATION Our score was calculated following an independent audit, which found that we improved from low risk last year at 10.2 to negligible risk this year at 5.7. We retained our leadership position in the diversified insurance sector with the lowest exposure among our peers (24.0) and the strongest management score (80.3). We also scored negligible risk ratings in terms of data privacy and security, corporate governance, human capital, business ethics and ESG integration. The insurance industry has a critical role and responsibility to drive sustainable business practices on the continent, and to this end, we continue to advocate for more signatories to the Nairobi Declaration, which supports the attainment of the UN Sustainable Development Goals. Our credit rating, meanwhile, remains strong. Mid-year, US credit rating agency Fitch upgraded our outlook to stable, giving us an IFS Rating of ‘A-’ and a Long-Term Issuer Default Rating (IDR) of ‘BBB+’. We were awarded the upgrade due to our progress in our development goals, product diversification into flood risk and outbreaks and epidemics, and the strong support of our donors. Fitch also noted our excellent claims payout track record and “extremely strong” capital position. Nurturing future climate leaders We launched our first-ever postgraduate Africa Scholarship Programme in February 2023, exclusively for African students and in partnership with Milliman Inc., a risk management, benefits, and technology company. It is aimed at broadening the talent pool in Africa, particularly in studies relating to mitigating the impact of climate change At the beginning of 2023, Sustainalytics, a renowned international authority in ESG research and evaluation, awarded us the global insurance industry’s top environmental, social and governance (ESG) scores. on African economies. We are also assisting students who need help to afford postgraduate studies and encouraging entrants into these specialised fields. The programme offered four scholarships covering up to three years of full-time postgraduate study at select universities on the continent, and our scholarship winners will begin their new journeys in 2024. This initiative is not a once-off; we look forward to selecting the next batch of future climate leaders next year. Innovating for growth and impact This year, we became the first insurer to pioneer flood risk coverage for Africa, co-developing a cutting-edge model with JBA Risk Management. Following successful pilots, we launched customised flood risk policies for six countries—Madagascar, Mozambique, Malawi, Côte d’Ivoire, Ghana, and Togo. By understanding each country’s risk exposures, we empower these governments to anticipate and manage floods, directing rapid response where it’s needed most. In Malawi, we co-designed a novel insurance mechanism to reinforce the government’s flagship social safety net programme, which protects drought-vulnerable communities. This shock-responsive policy is triggered when rainfall levels predict drought, releasing funds for cash transfers to assist additional beneficiaries. These innovations showcase our commitment to building climate resilience through flexible, localised solutions and product diversification, and we will continue adapting our product portfolio to fulfil the spectrum of our member states’ climate needs.
08 The power of partnerships In the drought-prone Horn of Africa, we renewed our engagement with the World Bank’s De-Risking, Inclusion and Value Enhancement of Pastoral Economies (DRIVE) programme. This allowed us to expand our pastoral livelihoods portfolio while boosting our market presence. Our written premiums and share of coverage increased fivefold to 10% in the region. ARC was also repositioned as Africa’s first multi-peril risk pool this year, pioneering the continent’s inaugural multiyear, multi-peril agreement, offered to Djibouti. This fiveyear deal provides ongoing capacity building and disaster risk insurance coverage against the country’s two most prevalent threats – drought and excess rainfall. It is also the first time that we are covering excess precipitation. In October, the Sovereign Risk Pools signed a joint Memorandum of Understanding that will increase cooperation and collaboration and take our service to nearly 100 nations to the next level. This watershed MoU opens up new possibilities in technical innovation, operational excellence, and climate advocacy through our joint initiatives. A significant partnership forged in 2021 that unites us with the United Nations Development Programme Côte d’Ivoire, the Côte d’Ivoire Environment and Sustainable Development Ministry (MINEDD), local agricultural and insurance bodies, and other technical partners, resulted in the launch of a groundbreaking meso insurance programme, safeguarding the country’s cocoa and rice farmers. This came after regulatory approval and endorsement from WFP was secured. We currently provide coverage for 5 000 beneficiaries with subsidy support from the WFP. COP28 We attended COP again this year and convened four panels of leading speakers to discuss developments and innovations in climate risk insurance solutions in Africa. We contributed insights on several forums, articulating the risk pools’ unified vision to scale up insurance coverage for the most vulnerable communities affected by climate change. We also took the opportunity to announce the launch of our insurance partnership with the One Acre Fund to provide agricultural insurance to their five million smallholder farmers in Africa, and we welcomed the UN Refugee Agency on board as our new Replica partner. Each year COP reminds us that when united behind a common purpose, we can achieve unprecedented impact. Valuable contributions We remain extremely grateful for our donors’ and partners’ continued support; their generosity in 2023was a testament to their trust and belief in us. Our work and critical role in mitigating the impacts of climate change would not be possible without their support. Together, we are focused on safeguarding the most vulnerable populations in Africa as natural disasters continue to become more severe and frequent. In 2023, we received a US$12 million grant from USAID for our Africa Disaster Risk Financing Project to increase the uptake of our products across the continent and for research and development. Additionally, the Canadian Government pledged US$8.9 million towards our Replica Programme. The funds will be channelled to the World Food Programme (WFP) to protect two million climate-vulnerable people and assist up to 10 African governments over the next four years. We also received a US$25 million funding commitment from the Dutch government at COP28. We appreciate our donors’ and partners’ commitment to ARC Ltd. over the years, which has allowed us to grow in our mission and vision of covering 200 million African people by 2025. The need, however, is so much greater – 700 million people on the continent are climate-vulnerable. We continue striving to mainstream disaster risk insurance and bringing more countries on board. L EADERS I N BUS I NESS , NURTUR I NG AFR I CAN TAL ENT AND I NNOVAT I ON
09 WHO WE ARE WHO WE ARE Serving AU member states and farmer groups, we use innovative financing tools to pool climate risks across Africa and transfer them to international markets. This approach strengthens pan-African responses to natural disaster and ultimately contributes to food security. A key focus is to ensure that our portfolio matches the evolving needs of our member states and that we deliver cutting-edge solutions to climate change impacts. With seed capital from the UK Foreign, Commonwealth & Development Office (FCDO) and Germany’s KfW Development Bank via BMZ, our mandate as a Class 2 mutual insurer has a commercial purpose. We remain headquartered in Bermuda until such time that a comparable legal and regulatory environment exists in an AU member state. By taking over the burden on governments and their people of natural disaster risks, ARC Ltd. can assist with a more measured, deliberate response. Through our risk financing instruments, rapid, predictable payouts are triggered for preapproved contingency plans when disasters strike, thereby saving lives and livelihoods. Our donors and partners We deeply appreciate the invaluable support of our donors and partners, who empower our work across Africa and help us build climate resilience in our member states. Their trust and commitment have contributed immensely to our joint mission to make a difference. Working closely together, we have been able to boost national disaster management programmes and expedite emergency funding. Our Replica programme continues to grow due to the generosity of our partners. African Risk Capacity Limited (ARC Ltd.) was launched in 2014 to operate as a unique hybrid mutual insurer and financial arm of the broader African Risk Capacity Group. Our unique mandate from the African Union was to provide insurance and other risk transfer solutions to African countries, and we have pioneered climate resilience across the continent ever since. OUR BIG AUDACIOUS GOAL To cover all 55 African Union countries and the 700 million people whose economic livelihoods and lives are at risk due to climate change. OUR MISSION To promote harmonised resilience solutions for protecting African lives and livelihoods vulnerable to natural disasters caused by climate change and other perils of importance to the continent. OUR VISION To be the development partner of choice, spearheading innovative disaster risk management solutions for climate resilience in Africa.
10 FINANCIAL CAPITAL FC • Investments • Financial reserves • Premiums HUMAN CAPITAL HC • Employees • Board • Organisational culture • Funders • Partners • Auditors • Underwriters SOCIAL CAPITAL SC • Regulators • Legislators • Member states • Media • Local communities CORPORATE SOCIAL RESPONSIBILITY CAPITAL SC • Africa Scholarship Programme INTELLECTUAL CAPITAL IC • Researched best practice • Regional benchmarks • Strategy and operational frameworks • Investment management • Information technology and systems • HR practice and initiatives • Business intelligence MANUFACTURING CAPITAL MC • Development of new products/distribution channels (ARC Group lead) • ARV system • Non-sovereign underwriting system (NSB) • Dynamics 365 • SAGE X3 • IT security systems NATURAL CAPITAL NC • Water usage • Energy usage • Carbon emissions OUR VALUES OUR CAPITALS OUR VALUES EXCELLENCE We challenge ourselves and colleagues to provide top-tier services and solutions. INTEGRITY We act in our member states’ best interests, guided by comprehensive data. We also engage in transparent stakeholder discussions. INNOVATION We continuously innovate and customise solutions based on unique in-country needs. SERVICE We identify countries’ requirements, provide support and assistance, and collaborate to solve issues.
11 ARC Ltd. has four membership tiers categorised as Classes A through D. These partners are instrumental in assisting our member states in procuring risk insurance coverage by helping to make premiums more affordable. Other funding partners This year, the US Government came on board to offer institutional support funding. PREMIUM FUNDING PARTNERS CLASS A MEMBERS CLASS C MEMBERS OTHER CAPITAL CLASSES: B AND D UK Foreign, Commonwealth and Development Office (FCDO) (previously the Department for International Development (DFID) Kreditanstalt für Wiederaufbau (KfW), the German Development Bank, via the Federal Ministry for Economic Cooperation and Development (BMZ) CAPITAL CONTRIBUTION: $50 MILLION CAPITAL CONTRIBUTION: $48 MILLION The United Kingdom and Germany hold Class C status and have been with us since our inception. Their valued support comprises seed capital furnished via interest-free loans, refundable over 20 years. This financial backing flows through the UK’s Foreign, Commonwealth and Development Office (FCDO) and Germany’s Federal Ministry for Economic Cooperation and Development (BMZ). These comprise our member states. Premiums paid by Class A members provide capital inputs. Class B members provide ARC Ltd. with grants and do not require repayment. Class D members provide equity capital and expect a return on investment. To date we do not have any such members, but we remain committed to incorporating this Class in our comprehensive growth plan. $50 $48 MILLION MILLION OUR CAP I TAL CLASSES OUR CAPITAL CLASSES
12 MEMBER STATES WITHOUT MOUs MEMBER STATES WITH MOUs THE GAMBIA CÔTE D’IVOIRE < RWANDA < BURUNDI GUINEA-BISSAU SIERRA LEONE LIBERIA LESOTHO > GHANA TOGO BENIN OUR FOOTPRINT OUR FOOTPR I NT
13 OUR MEMBER STATES OUR MEMBER STATES This past fiscal year, the ARC Group expanded its footprint to 39 member states and signed Memoranda of Understanding with 29 countries. By 2034, we intend to have reached our goal of covering all 55 African Union countries. Countries that complete the Group’s capacity-building programme, receive a certificate of good standing, and become eligible to join ARC Ltd.’s risk pool. This year Burkina Faso, Côte d’Ivoire and Senegal rejoined Pool 10A. Countries joining the insurance risk pool in any given year are classified as ARC Ltd. Class A members. Governments must keep their premium payments current to retain their status as such. They also need to have a Board-approved contingency plan in place that details how payouts will be used following a disaster. We mandate all member states to use our proprietary Africa RiskView (ARV) platform, which converts satellite rainfall data into meaningful disaster risk measurements and indexes. By meeting these obligations, member states gain access to extensive disaster risk tools and support. IN 2023, MEMBER STATES ARC EXPANDED ITS FOOTPRINT TO 39 SIGNED MEMORANDA OF UNDERSTANDING 29 BY 2034, WE’LL REACH OUR GOAL AU COUNTRIES 55 IN 2023 BURKINA FASO, CÔTE D’IVOIRE AND SENEGAL REJOINED POOL 10A
14 As an alternative risk solution, parametric insurance eases the financial blow of natural disasters on vulnerable nations. Satellite data is used to determine the potential impact of a disaster and the commensurate insurance payout, assuring governments of quick access to funds in the event of a calamity. This allows them to deploy emergency relief when needed most, instead of having to wait for months until damage assessments are complete. Parametric insurance has been in existence for more than 20 years, but in sub-Saharan Africa, the implementation of comprehensive disaster risk management (DRM) and financing (DRF) frameworks are still in their early days. Historically, governments have depended on post-disaster international donor appeals. This reactive model catalyses fragmented aid efforts, delayed funding, and a muted crisis response capacity. Consequences are severe – loss of life, infrastructure damage, interrupted essential services, health and hunger insecurity, and displacement. Since 2014, ARC has been working with governments to create awareness while motivating for the evolution of the appeals-based model to parametric insurance. ARC also helps governments improve their planning, preparedness, and response to natural disasters. This is a significant differentiator among parametric insurers. Humanitarian agencies continue to play a pivotal role, and the ARC Group’s innovative Replica Programme allows them to duplicate country policies. This collaborative approach has proven valuable for bolstering national resilience and increasing emergency coffers, enabling a proactive and coordinated approach that saves more lives and livelihoods. The Replica Programme builds on governments’ DRM efforts and helps them transition from traditional postdisaster relief to an integrated, anticipatory approach that includes gradual capacity building and government ownership over planning/response. Despite the growing recognition of the importance of parametric insurance, several challenges remain, including fiscal restraints, the lack of an insurance culture in Africa, policy gaps, competing economic priorities and political fluctuations. ARC Ltd. continues to work at creating a better understanding of how parametric insurance fits into DRM, while also addressing the cost of insurance premiums through innovations such as Replica and risk pooling. With Africa’s massive climate funding shortfall, it has never been more critical for the continent to look to strategic partners who can assist from within and to recognise that parametric insurance offers a lifeline. CLIMATE CHANGE & SUB-SAHARAN AFRICA The region is experiencing more frequent and fluctuating extreme weather events like floods, droughts and heatwaves. Climate change is also exacerbating disease, poverty and social and economic tensions. “Without adaptation measures, the impact from climate change could not only result in real GDP losses of up to 7% but also increase push over a million more people into poverty by 2050.” – The World Bank OUR OPERAT I NG ENV I RONMENT OUR OPERATING ENVIRONMENT
15 Valued members, donors, partners and stakeholders. In this annual report, we reflect on the milestone of 10 years – a profound achievement. Mr Abdoulie Janneh CHAIRMAN, ARC Ltd. MESSAGE FROM THE CHAIRMAN Having been appointed to the Board in 2018, I have seen first-hand ARC Ltd.’s impact in the disaster risk finance arena, on the lives and livelihoods of the most vulnerable and on the global stage. From 12.9 million people covered in 2014 to 26.4 million this year, and over $170 million paid out since its establishment, the figures speak for themselves. As climate-change disasters increase and move between extremes, ARC Ltd.’s relevance and impact is increasingly evident. The growth of the risk pools over this last decade has allowed for greater access and affordability and culminated in two records – in 2021, the highest payout in our history and this year, a record in premiums underwritten for Pool 10A. To keep pace with evolving weather phenomena and the unique needs of our member states, this past decade has seen much innovation. In 2023, we launched two firsts – a multi-year, multi-peril product for Djibouti and a flood risk product for Africa. The company has grown from strength to strength with a staff complement that has doubled. We welcomed several experts to the team and were pleased to increase the number of women employees in what is a traditionally male-dominated arena. ARC Ltd. prides itself on a strong Board comprising esteemed members with a wealth of knowledge and expertise across Africa and the insurance, financial and humanitarian sectors. This year, two new members joined us. International recognition continues to reinforce our credibility and standing in the industry. We have retained our position as the No. 1 company in Environmental, Social, and Governance (ESG) practices for the third year in a row, and rating agency Fitch upgraded us to A- for our progress in meeting our development objectives, enhancing our payouts and for driving product diversification. Our continued relevance in years to come will be seen in our expansion of coverage, further product diversification, increased sovereignty and sustainability and technical assistance to our member states to improve their preparedness and response to natural disasters. We will continue to drive private sector engagement and our nonsovereign business to support, among others, farmers. As always, we are deeply grateful to our donors and partners, who not only support us in our mission, but also share it. Over the last decade, we have accomplished a great deal together to expand coverage across Africa, address the affordability of premiums, and ensure that products meet the real needs of beneficiaries. We look forward to the next decade of making inroads and ensuring no one is left behind. Sincerely, Abdoulie Janneh ARC Ltd. Board Chairman MESSAGE FROM THE CHA I RMAN
16 ARC’s early, rapid, targeted intervention drives significant economic advantages over traditional emergency responses. ARC Ltd., as the financial and commercial affiliate of the ARC Group, assists member states with risk pooling and transfer facilities, enabling them to fortify their disaster risk management programmes and, in the event of a disaster, gain quick access to funds to mobilise emergency aid and rebuilding efforts. By pooling members’ disaster risks, the risk is shared, resulting in lower individual premium costs. Our cost-benefit analysis found nearly $2 of economic gain for every $1 spent on premiums by participating countries. Having started with four participating countries in the 2014/2015 risk pool, we now cover 17 countries and have issued 178 policies in our sovereign business and 32 policies in our non-sovereign business. CREATING VALUE CHANGING THE RESPONSE MECHANISM -3 -1 1 Harvest TIMELINE (MONTHS) ESTIMATE IMPACT RESPONSE ARC PAYOUTS RESPONSE 3 5 7 -2 2 4 6 8 9 ARC MODELLING SCALE UP SAFETY NETS ASSESSMENT APPEAL FUNDING KEY FEATURES OF THE ARC MECHANISM SPEED COST TARGETING » Eat less preferred foods » Other work » Use savings and borrow » Sell non-productive assets Reduce food intake Sell productive assets PRE-HARVEST UP TO 3 MONTHS 3 – 5 MONTHS 5 MONTHS + HOUSEHOLD COPING MECHANISMS CURRENT EMERGENCY RESPONSE AFRICAN RISK CAPACITY CREAT I NG VALUE
17 OUR IMPACT (IN DOLLARS) 7.2M 0.6M 1.1M 11.5M 2.1M 14.2M 21.1M 2022/2023 Replica 2021/2022 2022/2023 2020/2021 2019/2020 DROUGHT & TROPICAL CYCLONE DROUGHT & TROPICAL CYCLONE GOVERNMENT & REPLICA 2021/2022 2020/2021 2021/2022 Replica 2020/2021 2015/2016 2019/2020 1.2M 2.2M 8.1M 0.7M 2.8M 3.38M 4.6M 2.5M 32.2M 187641K 67000K 16.5M 5.4M 1.75M 2021/2022 2022/2023 2022/2023 2022/2023 2019/2020 2019/2020 2018/2019 2014/2015 GOVERNMENT & REPLICA GOVERNMENT & REPLICA GOVERNMENT & REPLICA 2021/2022 2019/2020 2019/2020 2014/2015 2021/2022 2014/2015 167133K 6.3M 2.1M 3.5M BURKINA FASO CÔTE D’IVOIRE MALAWI MADAGASCAR MALI MAURITANIA NIGER ZAMBIA ZIMBABWE SENEGAL SOMALIA TOGO THE GAMBIA CREAT I NG VALUE
18 Partnerships between governments, aid agencies and the private sector are pivotal to building climate resilience through mobilising resources, sharing knowledge, and pioneering innovation. While in Africa, the need for protection against natural hazards is greater than ever, the uptake of insurance premiums and affordability remain significant challenges. The ARC Replica programme was designed to speak to these challenges. The innovative risk-financing solution enables collaboration with humanitarian aid entities, such as Start Network, to work alongside member states, by purchasing similar policies, thereby expanding insurance coverage to protect more vulnerable communities. Additionally, in some cases, policies are subsidised by donors for countries that are not able to allocate funds from their own budgets. To date, the Start Network-ARC Replica rollout includes four countries – Senegal, Somalia, Madagascar, and Zimbabwe. “Our partnership has evolved significantly since it began in 2018,” says Amadou Diallo, Start Network Regional Disaster Risk Financing Advisor West, Central Africa, and Madagascar. “It has helped open the channels for collaboration, advocacy, and bilateral cooperation and enabled us to leverage the expertise of our network and offer better support to governments. Initially, we were initially active in one country only, but today, we work in multiple countries.” Diallo notes ARC Ltd.’s diversification from drought into other perils like floods and tropical cyclones. He says this diversified portfolio has increased their protection of 200,000 people to potentially millions. “In 2023, we expanded our activities to Madagascar and purchased our first cyclone policy with the government. We are looking at other existing risks, such as outbreaks and epidemics, which we hope will also be made available to us.” Nelly Maonde, Regional Advisor for East and Southern Africa at Start Network, agrees that the impact of the Replica programme is significant. “Beyond it being a financing instrument for early action, ARC, jointly with their Replica partners, has gone further to support governments to help develop disaster risk financing strategies. Efforts are combined with the aim of building sustainable national systems and integrating disaster risk financing into government fiscal planning and budgeting. By being part of the national budget, governments will not have REP L I CA PARTNER I NTERV I EW: START NETWORK REPLICA PARTNER INTERVIEW: START NETWORK Amadou Diallo Regional Disaster Risk Financing Advisor West, Central Africa, and Madagascar. Nelly Maonde Regional Advisor, East and Southern Africa
19 to look for subsidies from donors every year,” Maonde points out. She explains how Start Network is equipped to provide on-the-ground support to ARC. “Working directly with governments, we help create awareness and present evidence on the benefit of transferring part of the risk to ARC’s instruments. In some countries where the programme has evolved, we conduct joint awareness initiatives for parliamentarians and media experts to help raise awareness and encourage sovereign states to ratify the ARC programme.” Maonde highlights the fragmentation of similar initiatives across Africa. She says Start Network is trying to combat these isolated projects by introducing synergies between entities working towards a common goal. “We’re also trying to link to sustainability by contributing to national infrastructure, such as rainfall monitoring stations, so that ARC’s work is not viewed as simply a project. We have to contribute to building national systems that are sustainable and useful beyond the ARC component.” She says ARC Ltd.’s anticipatory action pilots are of particular interest to Start Network. “We strongly support the layering of anticipatory actions before impacts, and this is a potential area of collaboration. Product diversification is also critical to cover more Africans, and while drought has been our main entry point, it’s not the only product that interests us. We continue to follow ARC’s work closely.” Start Network also utilises ARC Ltd.’s parametric insurance as an additional humanitarian financing instrument. “The main benefits are that it increases available funding and pays out quickly following a disaster, allowing us to assist more populations, while providing financing for our activities,” Diallo says. Maonde explains that some countries have multiple policies, such as Somalia, which has coverage for two agricultural seasons. “We received a payout for Somalia in the first quarter of 2023 for their second season that runs from October to January. We were reviewing this recently and were pleased to note that we were on track with the timing – from the release of the funding to implementation and completion.” LOOKING AHEAD TO 2024 The success of the Replica programme to build climate resilience relies on more member states signing up, Maonde says, but they are seeing progress with countries like Malawi returning to use ARC Ltd.’s offerings. “But there’s more demand for funding for humanitarian action, more dependency on mobilising resources from donors and it’s not always working. Insurance coverage to solve the problem of limited financing when disaster strikes is competing with the needs of the traditional donor infrastructure. We need to be aware of what is not working and keep promoting disaster risk financing.” Diallo suggests that ARC Ltd. could explore regional risk assessments and solutions, given that disasters and risk transcend borders. “Instead of selling policies individually to governments, ARC could look at selling policies to cover high-risk areas,” he says. “While ARC has made much progress regarding the risk pools in a very short time, there is no Replica programme in Asia or the Caribbean, so the possibility exists to leverage off the experience in Africa and work with other continents to improve or build similar mechanisms”. Diallo also feels more collaboration is needed beyond the continent, starting with something as simple as extending the annual retreat invitations internationally. “We’ve seen that disasters and risks are global, and we should try to have a holistic and global approach. ARC has a leadership role in Africa, and it would be interesting to see how they can bring all the different actors together.” REP L I CA PARTNER I NTERV I EW: START NETWORK
20 The Sendai Framework guides the adoption of measures to address climate risk and build resilience, while emphasising the need for preparedness. By integrating disaster risk management and reduction into the national programmes of our member states, we help strengthen country capacity to withstand climate shocks. RESILIENCE-FOCUSED RECOVERY AND RECONSTRUCTION The ARC Group, as a critical, specialised AU agency, is aligned with major international disaster risk management (DRM) frameworks. • AU Agenda 2063 • UN Sustainable Development Goals (SDGs) • Paris Agreement on climate change • Sendai Framework for Disaster Risk Reduction 2015-2030 THESE FRAMEWORKS INCLUDE: SDGs - ENABLING PROGRESS SDG 01 NO POVERTY In 2023, ARC Ltd. helped improve risk management strategies in member states by supplying parametric insurance to 26.4 million individuals, allowing for governments to disburse cash assistance. SDG 02 & 03 ZERO HUNGER & GOOD HEALTH AND WELLBEING Member states have been assisted with extending cash transfers to citizens and been able to maintain their critical grain reserves and to ensure food security. SDG 13 CLIMATE ACTION ARC proactively approaches natural disasters by funding preapproved contingency plans, ensuring swift and predictable responses during climate emergencies. These initiatives also create more resilient communities and reduce poverty, aligning with SDG #1 by enhancing risk-coping strategies. SDG 17 PARTNERSHIPS FOR THE GOALS We’ve showcased the economic advantages of our support for the SDGs and the value provided to countries participating in the risk pool in case studies. 01 02 03 13 17 RES I L I ENCE - FOCUSED RECOVERY AND RECONSTRUCT I ON
21 RES I L I ENCE - FOCUSED RECOVERY AND RECONSTRUCT I ON
22 Through our strategic engagement at high-level global summits, conferences, and events across various platforms and our notable participation at COP28, we continually demonstrate our dedication to driving forward-thinking solutions and strategic collaborations to mitigate climate risks in Africa. We shed light on Africa’s unique challenges and showcase our critical work, which is made possible by our partnerships. 2023 offered a busy events calendar, and we include some of the highlights below: ESG is a global focus that is becoming increasingly important in Africa, as it can contribute to sustainable development and encourage investment by reducing risks for potential investors. The United Nations Environment Programme Finance Initiative Several events this year allowed us to demonstrate our leadership in climate advocacy. The annual Insurance Development Forum (IDF) Summit in Zurich was themed “Ambition, Action & Impact”, pertaining to the achievement of the Sustainable Development Goals (SDGs). It provided a platform for us to reveal the impact of our work in relation to the SDGs. At the Bermuda Climate Summit, ARC Ltd.’s Senior Legal Advisor, Timothy Nielander, highlighted the importance of partnerships across private, public, and humanitarian sectors in scaling up the response to climate change. The Africa Climate Summit in Nairobi, Kenya, included the 11thConferenceonClimateChange and Development in Africa. Chief Executive ARC LTD . ’ S ADVOCACY I N AFR I CA AND BEYOND ARC LTD.’S ADVOCACY IN AFRICA AND BEYOND ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) CLIMATE ADVOCACY Officer Lesley Ndlovu participated in a panel discussion on climate finance and natural capital accounting. He and Chief Operating Officer Ange Chitate also participated in Climate Week NYC in September, the largest annual climate event of its kind. Chief Underwriting Officer Malvern Chirume was part of a panel discussing the role of public-private partnerships in weather and climate risk management at the Weather Risk Management Association’s 2023 European conference. This year’s focus was on “Weathering uncertainty: strategies for effective weather/ climate risk management”. He addressed several topics, including the protection gap, risk pooling, regional risk pools, the Global Shield, and premium financing. Africa andMiddle East Roundtable inWindhoek was a significant platform for us in this regard. Chief Operating Officer Ange Chitate spoke on integrating ESG principles into insurance processes and frameworks, drawing on our experience and showcasing our strides in ESG.
23 ARC LTD . ’ S ADVOCACY I N AFR I CA AND BEYOND Head of Strategy and Partnerships Lorraine Njue, FIA, moderated a side event at the Africa Climate Summit, hosted by Young Insurance Professionals Africa, Mozambique Women for Inclusive Insurance, and Women Leadership in Insurance Africa. It was themed “Insurance Industry Role in the Integration of Nature-Based Solutions for Prevention in Disaster Risk Reduction”. The 45th OESAI Annual Conference in Mauritius was a highlight, themed “Leaving no one behind: Financial inclusion through innovation”. Chief Executive Officer Lesley Ndlovu participated in a panel discussion on the topic “Sustainability in Insurance/Future in Insurance” and presented on “Gearing up for the SDGs”. Head of Strategy and Partnerships Lorraine Njue moderated the panel. The International Cooperative and Mutual Insurance Federation (ICMIF) Sustainability Summit examined industry challenges and solutions. Among the major themes were sustainable investments, resilience, and underwriting. ARC Ltd.’s Chief Underwriting Officer Malvern Chirume took part in a panel discussion on embedding resilience and indirect mechanisms into insurance strategies. The World Economic Forum’s Sustainable Development Impact Meetings were hosted on the occasion of the United Nations General Assembly, aiming to accelerate momentum for the UN SDGs. Chief Operating Officer Ange Chitate chaired the session “Shared Prosperity: The Next Frontier for Business Impact”. GENDER EQUALITY INSURANCE EVENTS The Centre for Disaster Protection also held a private roundtable with experts in insurance, anticipatory action, and government where Chief Executive Officer Lesley Ndlovu participated on a panel exploring scalable DRF mechanisms for outbreaks, an opportunity to highlight our O&E product. Head of Business Development David Maslo andHead of Strategy and Partnerships Lorraine Njue participated in 11th Global Dialogue Platform on Anticipatory Humanitarian Action in Berlin, themed: “People at the centre: scaling up anticipatory action”. David presented on the anticipatory drought insurance pilot programme for Malawi and Zambia, in partnership with the United Nations Office for the Coordination of Humanitarian Affairs and the UK’s Foreign, Commonwealth & Development Office. Lorraine joined a panel discussing the financing of smart premiums. She also took part in the Namibia Women in Finance and Insurance Summit in Windhoek, an important platform for championing and empowering women in leadership roles in the financial and insurance sectors. This year’s theme was: “Sustainable Finance and Responsible Insurance: Women Pioneering Environmental, Social, and Governance Practices.”
24 AGRICULTURE-FOCUSED EVENTS COP28 ARC LTD . ’ S ADVOCACY I N AFR I CA AND BEYOND Executive Officer Lesley Ndlovu contributed to the roundtable discussing “Perspectives on financial mechanisms for preventing and mitigating food crises and transforming agrifood systems”. ARC is a member of The Microinsurance Network and its June Member Meeting in Luxembourg explored insurance for micro, small and medium enterprises. It offered a platform to showcase the latest programmes in resilience-building among smallholder farmers and developments in protecting MSMEs – an ideal opportunity for Head of Business Development David Maslo to present on our progress in this arena. Invest Africa hosted the event ‘Climate Change and the Effect on Agriculture’ in Cape Town, where Chief Operating Officer Ange Chitate was on a panel discussing how the continent can mitigate the impact of climate change on agriculture and build long-term resilience. The High-level Political Forum on Sustainable Development (HLPF) 2023, held at the United Nations headquarters in New York, included a side event that addressed “Financing for sustainable and inclusive agrifood systems and food crises prevention and mitigation”. Co-organised by the UN Food and Agriculture Organization (FAO) and the Permanent Missions of Brazil and Pakistan to the UN, Chief COP is an important annual event for ARC Ltd., providing a global platform to highlight our work, innovations, and partnerships. COP28 was characterised by its inclusivity, financial commitments, and actionable progress. It achieved the largest attendance in history – over 100 000 delegates and key stakeholders from African governments, development partners, and the reinsurance industry. ARC Ltd. played a pivotal role at COP28, leveraging the global platform to showcase our groundbreaking work, innovations, and partnerships. We convened four panels which drew on the expertise and insights of leading figures in climate risk insurance and highlighted the latest innovations and developments in climate risk insurance solutions. “Partnership in Action: Scaling Climate Risk Solutions in Africa” focused on expanding risk coverage to more vulnerable communities and how ARC Ltd.’s strategy of strong partnerships and replicating successful models to manage climate risks is helping to achieve this. “Navigating the Future: The Nairobi Declaration’s Journey in Sustainable Insurance” looked back on the two years since the declaration came into being, the progress so far and the way forward for signatories. It also sought to identify new opportunities in sustainable insurance. “Operationalising Micro- and Meso-level Premium Support for Climate Risk Insurance” explored best practices and operationalising micro- and meso-level premium support. Among the talking points were sustainability, the role of the public and private sector, and targeting premium support for the most vulnerable. “The Pioneers of Climate Risk Pooling” convened the leadership of the world’s major multi-country risk pools – Caribbean Catastrophe Risk Insurance Facility SPC, ARC Ltd., Pacific Catastrophe Risk Insurance Company (PCRIC), and Southeast Asia Disaster Risk Insurance Facility (SEADRIF) – to share innovations in building economic resilience to climate threats. This was the first time these four risk pool leaders came together as a global panel to participate in a public forum. Chief Executive Officer Lesley Ndlovu participated in numerous panels, contributing significantly to enriching the dialogues.
25 We shared our vision for the risk pools to proactively scale up insurance coverage to protect the most climatevulnerable communities and took the opportunity to launch our insurance partnership with One Acre Fund at COP28, aimed at providing agricultural insurance to 5 million smallholder farmers in Africa. COP28 was our last event of 2023, and we therefore ended on a high note. ARC Ltd.’s visibility on the global stage is growing, with invitations to share our insights flooding in. Through these engagements, we continue to champion the cause of climate resilience while our expanding influence helps us to catalyse action. ARC LTD . ’ S ADVOCACY I N AFR I CA AND BEYOND TAKING PART IN THE NDSI PANEL DISCUSSION AT COP 28: Managing Director NamibRe Patty Karuaihe-Martin, Abdoulie Janneh, Chairman ARC Ltd. Board, Phillip Lopokoiyit, Chair NDSI and CEO of ICEA Lion, Jacinda Njike, Africa Finance Lead, UN Climate Change High-Level Champions, Lesley Ndlovu, CEO ARC Ltd.
26 Our goal entering 2023 was growth through expanding and diversifying the insurance portfolio. The success of this depends on the number of countries participating in ARC Ltd. programmes. Lesley Ndlovu | CEO, ARC Ltd. MESSAGE FROM THE CEO Eligible countries must complete capacity building and obtain a certificate of good standing. It also depends on the range of products we offer. African countries face increasing climate and health risks like droughts, floods, cyclones, and Ebola; the more products we provide, the better we meet countries’ needs and grow our insurance pool. Paying claims rapidly after disasters provides our greatest impact. We aim to pay within 10 working days, so that countries have immediate resources to respond. In 2023, we paid a claim to Burkina Faso following a drought. Its crop policy payout amounted to $4.454 million, and its Replica crop policy payout was $2.628 million. We also oversaw the implementation of 2022 claims. Our model of contingency planning and rapid response is highly effective. In addition, we retained our #1 ESG rating, making us the top global insurance company for the third straight year. We also received a credit rating upgrade from Fitch to A-, one of the highest for African insurers and reinsurers. This demonstrates our ESG impact and financial strength. Donor partners play a pivotal role in our business model. We work with them in three ways: premium subsidies to enable more countries to participate, capital provision to underwrite more risk, and institutional development to improve products and services and onboard new countries. In 2023, we welcomed new partners like the US State Department to enhance our work serving African countries facing more frequent and severe natural disasters. Lessons learnt The 2023 pool year presented a critical challenge for ARC Ltd. to rebuild stakeholder trust after the data issues in 2022. Regaining the confidence of member countries and reinsurance markets was our top priority. We took a transparent, collaborative approach with member countries, treating them as partners rather than clients. We presented our detailed plan to resolve the data problems and incorporated their feedback. Switching to new, verified datasets restored countries’ faith in ARC Ltd.’s models and processes. Our sincere engagement resonated, evidenced by the enthusiastic participation of over 20 countries in the 2023 pool. Bolstered by the renewal of trust, we secured a heavily oversubscribed reinsurance programme. We underwrote a record $56.1 million in gross written premiums for the 2023 pool, proving the markets’ restored confidence in us. This experience underscored the immense value of continuous learning and improvement at ARC Ltd. We integrate lessons from each pool year to refine our processes and structures. This feedback loop drives us to serve members’ needs better and deliver more effective, efficient solutions year after year. MESSAGE FROM THE CEO
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