52 Djibouti, one of the smallest countries in Africa with an area of 23 200 km², faces acute climate vulnerabilities. With less than 1 000 km² of arable land, no significant, permanent surface-water source, and an average annual rainfall of only 130mm, Djibouti has almost no domestic food production and is entirely reliant on imports. Situated in the arid Horn of Africa, the country is prone to drought, rising temperatures, and water scarcity. Djibouti is also at risk of rising sea levels, positioned as it is at the southern entrance to the Red Sea. More than 80 percent of its people live in the capital, Djibouti City, near the coast, where extreme precipitation events have caused dangerous flash flooding. Pastoralism is extensively practiced in rural communities as a means of survival, but water sources and grazing for livestock must often be sought far away. The tradition of nomadic herders, who move according to the rainfall and availability of fodder, continues today. This reliance on the environment puts pastoralists at the mercy of climate change and for fragile countries such as Djibouti, innovative solutions to manage climate shocks are essential. Djibouti leads in Africa Recognising the need to build resilience to climate perils early on, Djibouti became one of the original signatories of the ARC Treaty in 2012, thereby gaining access to ARC’s integrated disaster risk management approach. In March 2023, Djibouti signed Africa’s first-ever multiyear, multi-peril agreement with the ARC Group to protect its most climate-vulnerable communities – a testament NON-SOVEREIGN BUSINESS: DJIBOUTI Africa’s first-ever, multi-year, multi-peril insurance product to the government’s intensified efforts to mitigate the human and financial costs of natural disasters while simultaneously expressing confidence in its ARC membership. The five-year deal provides ongoing capacity building and disaster risk insurance coverage against drought and excess rainfall – Djibouti's two prevalent hazards – with the policy covering the entire country. This necessitated customised indexes to trigger payouts based on the distinct impacts of each. The drought component covers the pastoralist population with the index aligned to the nomadic herders’ seasonal movements while also based on soil-moisture deficit. The excess precipitation component focuses on Djibouti City. The pioneering agreement was facilitated by ARC's partners, the World Bank and the Global Risk Financing Facility multi-donor fund, which provided US$2 million in funding. Descartes Underwriting contributed its scientific expertise for a precise understanding and modelling of the risks on the ground in Djibouti using advanced data and machine-learning techniques. The milestone deal was also part of the World Bank's rollout of the De-Risking, Inclusion and Value Enhancement of Pastoral Economies Project (DRIVE) across the Horn of Africa, aimed at shielding pastoralists from climate change impacts. By expanding its offerings and providing demand-driven technical support and holistic solutions to its member NON - SOVERE I GN BUS I NESS – DJ I BOUT I
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