Contribution to the Sustainable Development Goals

In order to be better prepared for natural disasters in the future, several countries in Africa have set up the African Risk Capacity (ARC), a continent-wide insurance pool. Member states insure each other via ARC so that they can benefit from comparatively reasonable insurance premiums. When a natural disaster strikes, ARC pays out to the governments of the affected countries, which then enables them to support affected households. Payments are index-based and depend on objective weather measurements such as precipitation and temperatures. If a contractually agreed threshold for these measurements is exceeded - signalling the start of a drought, for example - the countries affected will receive a payout within a short time.

A distinctive feature of ARC are its contingency plans: to be able to receive insurance coverage, governments are required to have a contingency plan that determines in advance how insurance payments will be used and distributed in case of disaster. Each plan undergoes a peer review process by the other ARC members in order to be approved. Rather than waiting for a natural disaster to happen and then hoping for international aid to arrive, African governments use ARC to actively prepare for such cases in order to be able to respond quickly and with coordination when a disaster strikes.

In 2015 the Sahel saw a drought which triggered the first payouts totalling USD 25 million to Mauritius, Niger and Senegal. The three countries had previously paid in premiums of USD 8 million. With these payments the countries were able to buy food and livestock fodder. In the future, ARC Replica will also enable international organisations and NGOs to buy insurance policies in conjunction with local governments and their emergency plans to organise funding for their disaster relief activities before they happen. KfW has already given USD 50 million to ARC on behalf of the German government. Additional funding is also planned.

Project Information - Climate Insurance-Africa(PDF, 271 KB, non-accessible)

In Tanzania thousands of women are benefiting from a mother-child health insurance which is aimed at impoverished expectant mothers. The 450,000th woman has just been accepted into the policy. The coverage allows these women to have their baby at a health clinic or hospital. This will lower mortality rates for mothers and children, which stand at over 430 deaths per 100,000 births - in Germany it is 4. This will also lower the anxiety levels of all those involved. Before this coverage was introduced, pregnancy and birth caused great fear due to the health risks involved. Now women are less anxious and confident during pregnancy. Babies are currently covered up to six months of age, and will soon be covered until their first birthday. A simple insurance number on a maternity pass given to women at the clinic of their choice grants them access to medical services for pregnancy and birth. Their families are also provided with health insurance for up to one year through community health funds.

In just a short time, the demand for mother-child insurance has surged. At the start of 2013, some 20,000 people were insured - this has in the meantime risen to more than 450,000. On average 11,500 new eligible insureds are added each month. This means the program reaches every second pregnant woman in both regions. Against this backdrop, the Tanzanian government has decided to extend the program and expand it to cover more regions in the country. It is also supposed to foster the establishment of a national healthcare insurance. KfW is assisting with a total of EUR 33 million that will be distributed until 2018.

Project Information - Insurance-Tanzania(PDF, 213 KB, non-accessible)

Read more about this on the topic on the website of the BMZ.

From a global viewpoint, it is primarily poor households that are not able to sufficiently deal with various risks in life. This applies in particular to developing countries where insurance is primarily aimed at families with above-average incomes. The poor and vulnerable in developing countries, however, do not have the means to adequately prepare for risks like the death of a household member, illness or harvest failures. An accident or illness can very quickly threaten a family's very existence, especially because most traditional or solidarity-based measures, e.g. within family associations, soon reach their limits.

The poor and vulnerable need better access to insurance to protect them from risks. For a long time, conventional insurance providers have not considered the poorer segments of the population in developing countries as their target group. In order to help close this gap, the LeapFrog Financial Inclusion Fund (LeapFrog) was set up with international support in 2009 - the first of its kind in the world. It funds the establishment and expansion of microinsurance companies in developing countries. This creates a wider range of coverage for low-income households and overall market stimulation. LeapFrog's engagement has already increased the financing of insurance companies by several international private insurers. KfW has contributed EUR 21 million to these funds.

The biggest individual poverty risk in Pakistan is illness. Until recently, most people in Pakistan had no health insurance – they often had to pay for doctor visits or medication out of their own pockets. In order to ease the potentially explosive social impact, state-subsidised health insurance schemes have recently been set up in large parts of the country to cover the poor – in part by the responsible subnational governments of the country and in part by the Pakistani central government.

The state-subsidised health insurance models in the province of Khyber Pakhtunkhwa (KP) and the region of Gilgit Baltistan (GB; Pakistan Special Territory under Federal Administration), which are supported by the German Federal Government, are regarded as pioneers of these developments. These models are being financed under the scope of a project by German Financial Cooperation (FC) and are being implemented by KfW. In both regions, the project covers some 100,000 households considered “poor” (i.e. around 800,000 people) over a five-year period for defined inpatient hospital treatments. The insurance package comprises selected secondary care, including births, and increasingly tertiary care in participating health care facilities. This provides, above all, poorer people with better access to medical services.

The FC project supported in KP and GB specifically finances the insurance premiums for poor households pro rata via KfW and the respective governments of KP and GB. The beneficiary households are identified in the context of national poverty surveys conducted by the Pakistani Benazir Income Support Programme (BISP). In the event of illness or if treatment is needed, the health insurance companies pay the agreed cost rates for medical services to the public and private hospitals involved. This increases the income of these medical facilities, which (should) lead to an improvement in the medical services offered by the facilities and thus to an increase in demand by the population. The project, which KfW is supporting on behalf of the German Federal Government in its first phase with a contribution of EUR 10 million, thus promotes a sustainable health insurance model.

In another phase, the existing project will be further expanded via KfW and the provision of outpatient health insurance services in KP and GB will be tested. The German Federal Government will provide EUR 12 million for this.