By Dela Ahiawor (Sustainability Editor)
Flood- threatened communities (communes) in Togo have shifted from a reactive to a more proactive and innovative approach (embracing parametric insurance) to build financial resilience against escalating rainstorm- induced flood risks.
In the previous decade, recurring floods in Lomé, the capital city of Togo have caused widespread destruction to households and the livelihood of people- leading to economic losses, including household poverty and displaced communities.
Consequently, three flood- prone communes in Greater Lomé: Kloto 1, Golfe 1 and Golfe 7 bordered by the Atlantic Ocean have implemented a new climate insurance programme (parametric insurance) aimed at reinforcing the resilience of vulnerable populations against flooding.
Clearly, insurance policies play a vital role in building financial resilience against climate change, by transferring financial risks in flood- prone communities to insurance companies.
For that reason, Kloto 1, Golfe 1 and Golfe 7 communes have officially signed a pioneering climate insurance policy, conceived by AXA Climate, a specialist in parametric insurance and climate change adaptation solutions.
AXA Climate’s parametric insurance project, is designed to provide rapid compensation in case of extreme rainfall, this marks a significant step forward in climate risk management in Togo.
The climate insurance package was underwritten by SUNU Assurances Togo, selected as a local insurer, while ARC Ltd was chosen as reinsurer thanks to its recognized expertise in parametric insurance. The partnership aims to develop innovative and accessible solutions aligned with the needs of local communities. The implementation of the insurance policy ensured the installation of weather stations in the communes, enabling precise measurement of rainfall to activate the compensation mechanisms. Each weather station will be able to trigger up to 50 million CFA francs when it measures a given rainfall threshold over the course of a day. The funds will be used to pump water and help the victims.
During the official launch of the insurance product, Winny Dogbatse, Mayor of Kloto 1 commune noted in a statement that: “Our residents have already suffered the dramatic consequences of the floods. This insurance gives us the means to act immediately to protect the most vulnerable populations.”
Drawing on science and data, AXA Climate aims to support vulnerable communities against flooding and also help them to adopt concrete adaptation and mitigation strategies specific to their territories and realities.
The insurance policy was designed by AXA Climate because parametric insurance plays a key role in bolstering the resilience of communities to climate risks. Indeed, signing the insurance policy is an important step for the protection of vulnerable communities in Togo. Going forward, any flooding disaster in the three communities will autonomously obtain the necessary resources for a rapid and effective response.
Commenting on the upside of this insurance policy,
Aimé Koffi DJIKOUNOU, Mayor of Golfe 7 commune reiterated that: “The implementation of this parametric insurance marks a turning point for our risk management. We are now better prepared for floods and can react with greater anticipation.”
Funding for the insurance project was made possible by co-financing from the InsuResilience Solutions Fund (ISF) and a premium subsidy from Humanity Insured. Each municipality contributes up to 20% of the total cost of the annual premium, guaranteeing the affordability of the product.
Olga Mursajew, InsuResilience Solutions Fund (ISF) representative in charge of the project: “ISF is committed to developing innovative insurance solutions for vulnerable populations. This project in Togo demonstrates that it is possible to design financial protection mechanisms at the local level.”
The insurance is designed to trigger one payout per weather station. And the technical structure of the insurance product was designed by AXA Climate. That is to say, parametric insurance has the potential to build the resilience of communities against climate risks.”
Parametric insurance also known as (event or index-based insurance) is gaining momentum in West Africa due to increasing flood risks. It ensures quick financial support (payout) against climate risks (flooding), allowing vulnerable populations to bounce back quickly to their normal or improved state after flooding disasters. In Togo, the introduction of parametric insurance sets the stage for climate risk management, making people more ready and prepared for flood disasters.
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