Between August and November 2024, the Northern regions of Ghana experienced severe drought which impacted the main food staples and crops such as maize, millet, groundnut and rice; spiking food security concerns and significant crop revenue losses. Following this, a first payout of USD 960,202 was triggered for the region under the African Risk Capacity (ARC) Ltd drought insurance policy, covering the period from June 2024 to October 2024. Ghana’s Ministry of Finance has confirmed that the process for the transfer of the funds for implementation has begun.
Moreover, the Government of Ghana is set to receive a second payout of USD 1,927,334, which will aid in providing a quick and effective response to affected communities in the Southern regions.
A lack of pre-arranged finance at the national level to deal with the impacts of droughts was identified as a major protection gap during the Global Shield’s In-Country Process in Ghana. This country-led process was spearheaded by the Ministry of Finance and supported by the Global Shield Secretariat. Among other elements of support, the process unlocked financial support to the Government of Ghana to purchase ARC’s drought insurance policy. In July 2024, Ghana was able to acquire the policy through premium support by KfW Development Bank[1] and the Global Shield Solutions Platform. Further information on the purchase of the insurance can be found here.
ARC’s sovereign-level climate risk insurance provides quick liquidity to governments when droughts and other climate-related impacts occur. It can be used by policyholder countries as a risk management tool to protect vulnerable people, promote food security, and ensure countries can bounce back quicker after climate shocks.
The payouts to Ghana were triggered due to severe rainfall deviation that fell below the pre-agreed threshold. The payable amounts were determined by the Africa RiskView Model which combines rainfall-based models on agricultural drought with data on vulnerable populations. Ghana is particularly impacted by droughts, with projections estimating an increasing number of affected people by 2060.
“Through the Global Shield In-Country Process, Ghana was able to purchase its first sovereign risk transfer solution from ARC. Thanks to these efforts, Ghana receives its first insurance payouts for climate and disaster risks. This financial support is not only a lifeline for our farmers and communities, but a testament to the importance of disaster preparedness in the face of climate adversity.”, says Phyllis Adwoa Fraikue, Director, Climate Finance Division. Ministry of Finance.
The Global Shield prioritises support for the most climate-vulnerable countries, which aligns with the new Fund for responding to Loss and Damage’s focus on those disproportionately affected by the impacts of climate change. By providing pre-arranged financial solutions, climate-vulnerable countries build resilience against and can respond appropriately to loss and damage. The Global Shield In-Country Process provides a good example for country-led processes within the international climate change finance architecture.
Read the full Press Release here.
[1] on behalf of the German Federal Ministry for Economic Cooperation