Closing Africa’s hydropower protection gap
IDRIMA (Integrated Disaster Risk Management Alliance), formed by the Insurance Development Forum (IDF) and AFD Group (Agence Française de Développement and Expertise France – AFD), has launched a new paper, From Exposure to Protection: The Case for Parametric Insurance Revenue Cover for Hydro-Dependent Utilities in Eastern and Southern Africa.
The paper outlines the climate-financial risks that energy systems in Africa face and proposes parametric insurance as a tested and yet to be scaled solution with specific benefits, from protecting hydro-dependent utility revenues, to shielding public finances and energy tariffs.
It points out that hydropower accounts for over 17% of electricity generation across Africa, and above 80% in countries such as the Democratic Republic of the Congo (DRC), Ethiopia, Malawi, Mozambique, Uganda and Zambia. This dependence makes electricity supply, public finances and sovereign creditworthiness directly vulnerable to hydrological variability, a risk that climate change is making more frequent, more severe and increasingly unpredictable.
The paper outlines how revenue protection can complement investment in resilient infrastructure and highlights the potential for regional risk pooling to expand access to protection. Including case studies, it also presents practical steps which power utilities, ministries of finance, energy and insurance regulators, international financial institutions and development banks, as well as private finance institutions are invited to take to enable insurance protection to be put place.
Céline Boulay, IDRIMA facility lead at the AFD Group, said: “The current El Niño-Southern Oscillation makes the risks faced by energy utilities a stark reality, especially in Africa and Latin America. We hope that this paper will help understanding of how parametric insurance for critical infrastructure can be integrated into national disaster risk financing strategies, alongside reserves and contingent credit – and prompt action. As IDRIMA, we are ready to help.”
Ekhosuehi Iyahen, Secretary General, Insurance Development Forum, said: “Energy supply is at the heart of every country’s economic and social development; when it fails people and businesses suffer real consequences and economies pay the price. The role of insurance is to facilitate development and protect from shocks, and we are delighted to provide a practical guide for action with concrete recommendations through this IDRIMA paper, at a most relevant time.”
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