37 REP L I CA PARNTER I NTERV I EW: WFP The WFP is also innovating with the company on several initiatives, some of which fall outside ARC Ltd.’s sovereign business, such as the Côte d’Ivoire agricultural project. “ARC Ltd. has been working with a consortium of local insurance companies and consultants to design a unique product that is both complex and sectorial,” explains Dubreuil. “We’re exploring this for The Gambia as well. In Madagascar and Malawi, we are working with ARC Ltd. as a continental stakeholder to determine the most sustainable way to develop agricultural insurance further and better involve local stakeholders”. The importance of parametric insurance The tools used by the WFP on the African continent are mainly parametric, also beyond its work with ARC. “It’s an important instrument for us, however, it could be further optimised,” points out Emily Jones, Macro Insurance Programmes Lead in the Climate and Resilience Service. This year, the WFP began working with ARC Ltd. to design a risk layering strategy connecting the Replica policy with a contingency fund. “It would trigger WFP funds for severe events at a local level, such as a disaster in a small area, that would not trigger a national policy,” she explains. Dubreuil adds: “We’re also discussing how we could potentially add a catastrophe layer because right now, the policies are limited in the way they are structured.” “The CAT layer would be positioned outside ARC Limited’s sovereign business and above the ARC Replica insurance and could potentially reduce the exhaustion point of the Replica cover,” says Jones. “We are also looking at our own operations and seeing how we can make them more effective.” Dubreuil explains that the WFP currently spends about $8 million in premiums annually. “However, when your rate online is around 20%, this means your global coverage can only be five times the amount you pay. By paying $8 million, you get $40 million, which means our capacity to respond to a catastrophic shock is quite limited, even if we’ve spent a significant amount. WFP SPENDS $8M IN PREMIUMS ANNUALLY Photo Credit: Burkina Faso Regional Program
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