The Insurance Development Forum and the United Nations Development Programme, along with the German Government and the Lagos State Government have announced a €1.6 million project to develop a sub-sovereign risk transfer scheme to provide flood risk cover for Lagos State.
The Insurance Development Forum, (IDF) notes that this project will leverage innovative insurance solutions to protect 1.7 million households, which equates to 8.5 million people in Lagos State, ensuring quick payouts in the event of flooding.
It will harness a parametric insurance solution that will pay out a set amount based on the magnitude of the flood, as opposed to the magnitude of the losses in a traditional indemnity policy.
The insurance product is expected to be integrated within the existing flood risk management framework, says IDF, and will enhance the Lagos State flood resilience and contingency planning in the coming years.
The risk transfer project is led by IDF members AXA Climate and Swiss Re and supported by UNDP.
Other partners in the project are AXA Mansard, the Nigerian entity of the AXA Group; Africa Risk Capacity Ltd., an affiliate of the African Union’s African Risk Capacity; JBA Risk Management, flood data specialists in flood hazard and vulnerability datasets development; and ICEYE, an earth observation-driven near real-time flood depth and extent data provider.
Ivo Menzinger, Co-Chair of IDF Sovereign & Humanitarian Solutions Working Group and Head Europe, Middle East & Africa and Managing Director Public Sector Solutions at Swiss Re, commented, “Flooding in Lagos disproportionately impacts poor and vulnerable communities, and I am delighted that IDF Members Axa and Swiss Re have stepped up to help provide a flood risk transfer mechanism in Lagos that can play a crucial role in financing the residual flood risk faced by the population.”
“We believe that preventive measures and insurance are two sides of the same coin. But a critical limit to all risk reduction measures is the current lack of data and modelling, by supporting the compilation, creation and analysis of flood risk data in Lagos as a public-private-partnership, these crucial steps to design the insurance product will also lead to the creation of key assets for other measures such as the mapping of vulnerability zones, to help improve resilience and proactive flood risk management in Nigeria.”
The response coordination will be supported by the Office of the Governor of Lagos State, the Ministry of Finance and the Lagos State Emergency Management Agency. The InsuResilience Solutions Fund (ISF), funded by the KfW Development Bank on behalf of the German Federal Ministry for Economic Cooperation and Development and managed by the Frankfurt School of Finance & Management, will co-fund the project alongside the IDF insurance industry members.
Zainab Shamsuna Ahmed, Minister of Finance, Budget and National Planning, Nigeria, said, “The Lagos State Government is very aware of the ongoing flood risks in the state, the state has placed emphasis on these risks and is currently focused on planning, mitigation, and response.
“I’m very pleased that through this programme we are placing greater emphasis on proactive finance and risk management and transfer, with the ambition of creating greater resilience for Lagos State’s population.”
In addition to playing a coordination, project management and convening role throughout the development of the risk financing solution for Lagos State, UNDP, through its Insurance and Risk Finance Facility, will also work with the Federal Government of Nigeria to make risk transfer central to the way in which the country tackles both climate change and development, helping to build the country’s financial resilience.
UNDP Nigeria Resident Representative Mohamed Yahya, added, “We at UNDP Nigeria are committed to working closely with the Federal Government of Nigeria to support capacity building and contingency planning to help build measures that will guard against flood risks in Lagos State.
“UNDP will deploy technical assistance to support the governance of risk financing pay-outs from an industry that will ensure that the right management systems and practices are put in place.”
Antoine Denoix, CEO of AXA Climate, said, “We are delighted to be leading this project and working with global partners as well as local insurer AXA Mansard. Flood risk capacity development for Nigeria within the underwriting community will be key in developing appropriate flood risk models and products as well as in integrating risk management advisory for Lagos State.
“This initiative offers immediate assistance to affected people, especially the poor and vulnerable, and protects critical infrastructure. Some funds can also be used for immediate reconstruction of roads, bridges, and other infrastructure.”