African Risk Capacity Limited (ARC Ltd) chief executive Lesley Ndlovu (LN) sees insurance as a major pillar for climate finance on the continent. This week, the Zimbabwean executive also told this newspaper he hoped financial commitments made during this year’s United Nations Climate Change Conference would be honoured, particularly for Africa, which bears the brunt of climate change-induced weather extremes. Ndlovu was recently named as one of Time Magazine’s 2024 100 Most Influential Climate Leaders in Business. He spoke to our senior reporter, Freeman Makopa (FM) and below are excerpts of the conversation:
FM: Congratulations on the recognition by Time magazine. What does it mean for the work that you are doing at ARC?
LN: The recognition is a culmination of many years of hard work at the service of African countries in the face of increasing frequency and severity of natural disasters brought about by climate change. Insurance has emerged as a critical part of the climate financing landscape alongside other instruments, such as contingency funding and catastrophic bonds.
We expect significant growth within the insurance industry because when you look at Africa, the percentage of insured losses are still extremely low. At ARC, we are providing insurance to about 50 million people per year, but we estimate that there are over 700 million people whose lives and livelihoods are at risk because of climate change.
FM: You were also recognised by the World Economic Forum not long back. How has that impacted you professionally?
LN: In 2022, I was selected by the World Economic Forum as one of the Young Global Leaders. Every year, the World Economic Forum selects about 100 people under 40, who they believe are going to make a significant difference in the world.
I was really honoured to be one of those people. It has allowed me to scale up the work I am doing on the climate insurance side. It has brought a lot of visibility to the work that my colleagues and I are doing at ARC. It has enabled us to attract additional funding for the people that need it.
I have had the wonderful opportunity to interact with my peers from all over the world, who are also working on the most pressing challenges that mankind is facing.
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FM: Tell us about your appointment to the Mutapa Investment Fund board
LN: In November 2023, I was appointed by His Excellency President (Emmerson) Mnangagwa to be the vice chair of the Sovereign Wealth Fund. The fund is created in terms of the Sovereign Wealth Fund Act and seeks to preserve and grow capital for future generations in Zimbabwe.
The sovereign wealth fund is an extremely important development in the economic history of Zimbabwe. The immediate challenge is to turn state-owned enterprises from being a drain on the fiscus to being a contributor to the fiscus. There are three ways in which we look to improve the performance of state owned enterprises. These include operational excellence in terms of ensuring that operations of the entities follow benchmarks of international standards, so that they are more efficient.
The second aspect is financial. There is scope to improve the balance sheet of the entities, looking at how they are financed, how they raise capital. The third is improving the governance and oversight that exists within these entities.
We have appointed an exceptional management team led by the former Reserve Bank governor Dr John Mangudya. We look forward to executing the strategy and starting to drive some of the benefits and synergies that we are seeing in the market place.
FM: How important is ARC in the context of climate change in Africa?
LN: African Risk Capacity is the largest provider of climate insurance on the continent. According to a study by the Centre for Disaster Protection, ARC provides 85% of all prearranged disaster financing on the African continent.
As of today, there are 39 countries that have signed the ARC treaty to become members. We represent the largest and most extensive network of African countries proactively dealing with climate change induced natural disasters. We work across three levels; providing insurance to countries.
Secondly, we provide insurance to humanitarian agencies such as the World Food Programme. Finally, we are also involved in micro and meso insurance where we act primarily as a reinsurer, supporting local insurance companies in deploying insurance solutions in their market.
FM: How active have you been in Zimbabwe?
LN: ARC is the largest reinsurer of climate related risks in Zimbabwe. We provide insurance at the level of the national government of Zimbabwe through the Ministry of Finance. We also provide insurance through our humanitarian agency partners.
Finally, we are very active in the reinsurance market, providing reinsurance coverage for national programmes for farmers. We have been operating in the Zimbabwean market for the past four years and we have seen significant growth in terms of insurance coverage.
We are delighted to see Zimbabwe leading the way on the continent in terms of systematically integrating insurance as part of their disaster and risk financing matrix.
FM: What do you think are the main challenges for a country like Zimbabwe?
LN: Looking at climate finance beyond insurance, the first and obvious problem is that there simply isn’t enough climate finance that is available.
We have just come back from COP29 and the US$230 billion per year that was agreed is still a very small fraction of the overall climate financing needs for adaptation and mitigation. Once you deal with the issue of not enough climate finance, you also have to grapple with ease of access to the funding that has already been pledged.
What we are seeing on the landscape is a multiplicity of institutions, which are in some areas complementary, but competing with others as well. Each of these institutions has their own reporting standards. So, even if theoretically there is a lot of funding available, the process of getting that translated into cash is still painfully slow and is something that has to be urgently addressed.
FM: How can the private sector be more involved in climate finance issues?
LN: In terms of the private sector, you could look at this from three perspectives. The first is around investments. Climate change is not a problem that exists outside of any other issues that a business has to grapple with.
So, when you think about it from a corporate standpoint you need to have a resilient supply chain. This supply chain can easily be disrupted by weather events.
Investments into climate adaptation and mitigation are therefore imperative for the corporate sector. It is not just about having your own funds to invest, it is also about crowding in additional funding into your landscape.
FM: What other issues must be considered?
LN: The second aspect would be linked to risk transfer. This is a role traditionally played by insurance companies whereby we are transferring risk from the most vulnerable people onto our balance sheet and then into the global reinsurance markets.
When an event occurs, you have funding flowing in the opposite direction from the global reinsurance markets to the people that have been affected. The third role is on risk management.
In the ordinary course of our business, we all generate a lot of data, we know where the flooding occurs, we know where the droughts are occurring and this data should be systematically collected and used to develop solutions at the community level as well as at the national level.
FM: What are your expectations after this COP29?
LN: My expectation is that the amount of climate finance available is going to be significantly scaled up. But we are already disappointed because the amounts agreed after weeks of negotiations fall well short of what is needed to make a difference.
The second aspect is on streamlining how a country such as Zimbabwe can access this finance. It doesn’t serve us to hear that there is US$100 billion that has been pledged if there is no practical way to access it.
Insurance is accepted as one of the mechanisms for paying for losses and damages brought about by climate change. In Africa, the problem we face is that there simply isn’t enough insurance available. If it is available, it is not easily accessible or affordable.
Addressing this has to start by making insurance more available, accessible and affordable. As Africa’s leading climate insurer, we also have a big responsibility to play in terms of educating people on the benefits of insurance.
