Africa Specialty Risks is lead reinsurer in the $35m placement for Africa’s second most disaster prone country

In a first for Africa’s second most disaster-prone country, the Mozambique Government, through the National Institute of Disaster Management (INGD), has purchased cyclone insurance in an effort to protect its most vulnerable populations from the increasingly frequent impact of cyclones.

Africa Specialty Risks was the lead reinsurer in the inaugural Mozambique cyclone parametric placement. This wind speed and rainfall cover was structured by PULA in collaboration with the World Bank.

This cover is designed to provide resilience to the Mozambique economy against the destructive effects of cyclones by providing the state insurer with a pay-out when certain triggers are met.

There is $35 million of cover, based on carefully calculated thresholds.

Antonio Jose Beleza, deputy director of the National Emergency Operations Center at INGD, commented: “The cyclone program will provide crucial funding and stability to the Mozambique people and economy.

”The program will help build resilience in the economy, and highlights the importance of building risk mitigation instruments outside of the standard disaster risk insurance specifically designed to meet the increasing cyclone risk to Mozambique.”

There are objective measurements of weather events, modelled to map to economic loss. This eliminates the need for a time-consuming and costly claims process and allows for the prompt provision of funds to support recovery efforts. 

Closing the protection gap

During 2022, natural disasters caused a $313 billion global economic loss: 4% above the 21st-century average, of which $132 billion was covered by insurance, or 42% of total, according to Aon.

In Africa severe flooding events were 2022’s worst natural disasters in Africa. Mozambique is Africa’s second most disaster prone country: tropical storms and cyclones in Mozambique have increased in frequency and intensity because of higher ocean temperatures brought on by climate change.

Since January 2022, Mozambique has been affected by three tropical storms or cyclones, affecting over 900,000 people and destroying around 220,425 hectares of crops due to flooding.

Building resilience

While weather risk is routinely parametrised in the US, this programme is the first of its kind for cyclone cover in Africa, designed specifically for the continent, and continuing the growth of parametric disaster cover across the continent.

Dr Raveem Ismail, head of Parametric Underwriting, Africa Specialty Risks, added: “This collaboration brings together the expertise of multiple organisations to provide a comprehensive solution for cyclone risk in Mozambique.

”We are confident that this program will make a real impact in reducing the economic impact of cyclones on the communities and businesses in the region.

”This is an important policy for Mozambique, one which has been designed in Africa, to meet the growing need for cyclone insurance, and is an example of what is possible for insurance products across the continent.”