Ghana has received a total of US$2.86 million under its first ever sovereign drought insurance policy from African Risk Capacity (ARC) Limited to support farmers affected by severe drought conditions during the 2024 planting season.
The payout, which was officially presented to the government on Monday, is intended to assist about 109,000 vulnerable households in farming communities across the northern and southern belts, where prolonged dry spells led to crop failures and heightened food insecurity. The funds are also expected to help strengthen resilience ahead of the next agricultural season.
The Director General of the ARC Group, Dr Jean Chrysostome Ngabitsinze, handed over the cheque to government officials, including the Deputy Minister for the Interior, Mr Ebenezer Okletey Terlabi, and the Director General of the National Disaster Management Organisation (NADMO), Major (Rtd) Dr Joseph Bikanyi Kuyon.
Dr Ngabitsinze explained that the payout comprised US$960,202 for the northern agricultural season and approximately US$1.9 million for the southern season, amounting to approximately GH¢32.9 million at current exchange rates. The northern payout covers the June to October 2024 period, while the southern region payment addresses drought impacts experienced between August and November 2024.
“Behind these figures lies something far more meaningful than numbers. They reflect the strong political will of the Government of Ghana to stand by its people in times of hardship,” Dr Ngabitsinze said. He commended Ghana for demonstrating leadership by investing in preparedness and resilience, describing the country as setting a standard worthy of recognition.
Mr Terlabi said the insurance payout would significantly complement government’s ongoing interventions by enabling the scaling up of assistance to affected communities, improving food security and enhancing resilience among the most vulnerable populations. He noted that climate shocks were no longer distant threats but present day realities, adding that government remained committed to strengthening early warning systems, expanding social protection mechanisms and deepening partnerships to mitigate the impacts of climate related disasters.
“A secure environment is the bedrock of national development, public confidence, economic growth, and social cohesion,” Mr Terlabi stated. “As we navigate an increasingly complex world, the need for innovative, collaborative, and forward thinking approaches to safety and security has never been more urgent.”
Major (Rtd) Dr Kuyon described the ARC payout as a powerful affirmation of foresight, partnership and collective resolve, noting that NADMO had coordinated inter agency actions to ensure that relief reached the right beneficiaries in a timely, transparent and accountable manner. He said the support had helped preserve dignity, stabilize livelihoods and prevent the erosion of long term development gains in affected communities.
The 2024 drought was among the most severe in decades, with significant rainfall deficits recorded across eight regions. Data from the Ghana Meteorological Agency and the Food and Agriculture Organisation (FAO) showed that rainfall in July fell to about seven millimetres, compared to the long term average of 24 millimetres, severely affecting maize, rice, groundnut and yam production.
More than 928,000 farmers were impacted by the drought, with estimated investment losses of GH¢3.5 billion and revenue losses of GH¢10.4 billion. The drought particularly affected the Northern, North East, Savannah, Upper East, Upper West, Bono East, Oti and Volta regions, where agriculture forms the backbone of livelihoods for most households.
The payouts were triggered due to severe rainfall deviation that fell below pre agreed thresholds established in the insurance policy. The payable amounts were determined by the Africa RiskView Model, which combines rainfall based models on agricultural drought with data on vulnerable populations. This parametric insurance mechanism allows for faster payouts compared to traditional indemnity based insurance, as payments are triggered automatically when specific weather conditions are met.
Phyllis Adwoa Fraikue, Director of the Climate Finance Division at the Ministry of Finance, described the payout as a crucial milestone for Ghana’s climate adaptation efforts. “Through the Global Shield In Country Process, Ghana was able to purchase its first sovereign risk transfer solution from ARC,” she said. “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.”
In response to the drought, government, through NADMO and development partners such as the World Food Programme, conducted a comprehensive drought impact assessment and rolled out early interventions. These included cash transfers, relief items and the distribution of drought tolerant seeds and fertilizers to affected farming communities.
The ARC insurance payout was made possible through premium support from Germany’s KfW Development Bank under the Global Shield against Climate Risks initiative, easing fiscal pressure on Ghana and enabling timely access to insurance coverage. KfW Development Bank and the Global Shield Solutions Platform (GSSP), managed by Frankfurt School of Finance and Management, jointly provided US$1 million in financing for the insurance premium.
The Global Shield against Climate Risks was launched by the Vulnerable Twenty Group of Finance Ministers (V20) together with the Group of Seven (G7) and other supporting countries at the 27th Conference of the Parties (COP27) climate summit. With around EUR 300 million raised in funds, the initiative aims to increase protection for vulnerable people by providing and facilitating substantially higher and more effective pre arranged finance against disasters.
Ghana’s participation marks the culmination of an inclusive, country led process coordinated by the Global Shield Secretariat. 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 process was spearheaded by the Ministry of Finance and supported by the Global Shield Secretariat.
Ghana purchased its first sovereign drought insurance policy from ARC Limited in July 2024, following extensive consultations with stakeholders. The policy was designed to protect Ghana’s agricultural sector against the risk of drought, with any payout specifically directed toward safeguarding food security and stabilizing the agricultural sector.
Malvern Chirume, Chief Underwriting Officer at ARC Limited, praised Ghana’s proactive approach. “The Government of Ghana has shown foresight and initiative by implementing this first ever drought policy,” he said. “Within the context of climate change where drought events will increase in frequency and severity, the country is now protected against a potential crisis.”
Chirume emphasized that the policy extends beyond financial protection by ensuring vulnerable communities in Ghana can continue to thrive despite increasingly erratic weather patterns, thanks to early warning tools available to the government. “This policy is also a key component of our broader efforts to enhance climate resilience across Africa,” he added.
Karsten Löffler, Co Head of the Global Shield Solutions Platform, said the support demonstrates what pooling funds for pre agreed risk financing solutions and international coordination can achieve. “The GSSP is very pleased to financially support the purchase of ARC drought insurance by the Government of Ghana for the benefit of vulnerable populations,” he stated.
Malte Marek, Senior Portfolio Manager at KfW Development Bank, noted that as the second largest economy in western Africa, Ghana can set the scene for other countries joining ARC in the future. “KfW Development Bank is very happy that Ghana is becoming an active member of the ARC family,” he said.
Ghana’s proactive approach, in collaboration with ARC, sets a strong example for other African nations facing similar climate related challenges. As the continent confronts the realities of climate change, risk transfer mechanisms such as drought insurance will play a crucial role in protecting lives, securing livelihoods and strengthening climate resilience across Africa.
Ghana is particularly impacted by droughts, with projections estimating an increasing number of affected people by 2060. The country’s experience demonstrates that trust, accessibility and innovation are key to a sustainable disaster risk financing ecosystem that protects vulnerable populations.
The Ministry of Finance has confirmed that the process for the transfer of the funds for implementation has begun, with distributions expected to reach affected communities through established government channels. The funds will support immediate relief efforts while helping farmers prepare for the next agricultural season.
The Global Shield prioritizes 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.
