KfW support for drought insurance for Africa

Frankfurt (ots) -

Embargo: 24.01.2014 16:00

- Nobel Laureate Robert J. Shiller presents new insurance
instrument at the World Economic Forum
- Approx. EUR 50 million to capitalize ARC Insurance Company
- African states less vulnerable to climate change

On behalf of the German Federal Ministry for Economic Cooperation
and Development (BMZ), KfW Development Bank takes an interest of
approx. EUR 50 million (EUR 46 million of which is equity capital and
EUR 4 million of which is a grant for consultancy and training
measures) in ARC Insurance Company Ltd. (Africa Risk Capacity Agency
Insurance Company (ARC)) and is thus significantly involved in the
setting up of ARC. This innovative insurance company is at the focus
of today's event at the World Economic Forum in Davos by Robert J.
Shiller, the 2013 Nobel Laureate for Economics.

The company is offering African countries insurance against
droughts for a risk-adjusted premium. In the event of a drought, ARC
agrees to promptly pay out the insured sum for a drought programme
that is agreed upon with the policyholder and directly benefits the
local community. The instrument is helping the affected African
countries to be far less vulnerable to the risks of extreme weather
events and drought caused by climate change.

"The world's first drought insurance for African states is a key
contribution to food security and poverty alleviation for African
communities that are particularly affected by natural disasters such
as droughts. Indeed, this needs-based and sustainable insurance
solution, which is affordable for the countries, is an innovative
milestone. We are delighted to have the opportunity to turn the ideas
of Nobel Laureate Robert J. Shiller into reality as part of an
investment on behalf of the German Government," said Dr Norbert
Kloppenburg, Member of the KfW Group Executive Board.

Climate change has long since become a reality - and its effects
are already being felt, especially by people in developing countries,
i.e. those who are the most vulnerable. It is up to us, the affluent
industrialised countries and co-contributers to climate change, to
take action. With this drought insurance scheme, we are giving
affected countries an instrument with which they can react quickly to
climate-related crop failure. Smallholder farmers, for whom a period
of drought can easily turn into a threat to their survival, will
benefit especially.

KfW and the UK's Department for International Development (DFID)
are contributing the seed capital for the ARC insurance company. The
World Food Programme (WFP) initiated the project on behalf of the
African Union (AU). Other donors, such as the Swiss Agency for
Development and Cooperation (DEZA), DFID and the Swedish
International Development Cooperation Agency (SIDA), have been
supporting the development of the insurance model and various types
of preparatory work.

The insurance company is managed by a private insurance manager
and underwriter. It is expected that the equity participations by KfW
and other public investors will mobilise private investors. In the
medium run ARC will be majority owned by the African countries who
benefit from the insurance cover. ARC is procuring the reinsurance
services from commercial insurance companies such as Munich Re or
Swiss Re.

For more information about ARC and KfW Development Bank, please
visit www.africanriskcapacity.com and www.kfw.de.

Press Contact:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM) Sonja Höpfner
Tel. +49 (0)69 7431 4306, Fax: +49 (0)69 7431 3266,
E-Mail: Sonja.Hoepfner@kfw.de, Internet: www.kfw.de