Design of a Flood Cover Insurance for Public Assets in Ghana

The Greater Accra Metropolitan Area (GAMA), Ghana experiences perennial rain events on an almost annual basis. This heavy rainfall causes significant economic and physical losses to the Accra region. For instance, approximately 40% of all assets managed by Accra Metropolitan Assembly (AMA) have reported flooding in previous years, while 40 AMA-managed assets are located in major flood zones. Estimates point to roughly ninety million Ghanaian Cedi (GHS) of material damages for these premises.

Developing an appropriate insurance product is thus vital in coping with these flood risk damages. It is one of the key parts of the integrated flood risk management project in GAMA — a joint project by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and Allianz Reinsurance. As a part of this project, an indemnity-based flood cover for three municipalities (GA East, GA West, and AMA) has been designed. It covers the aggregated losses of all insured assets managed by a municipality that are hit by a severe single flood event. The claims pay-out includes replacement costs of insured premises, unsecured inventories, and a 20% buffer for emergency relief measures. The scope of this project is limited to the geographical boundaries of GAMA to ensure a focused product design.

This insurance product is not only relevant for GAMA, but also acts as a serious alternative risk financing route for other regions that regularly and increasingly experience severe flooding. The design of this product can be easily adapted to different municipality’s needs, if sufficient portfolio and loss data as well as the willingness to invest in risk reduction and preparedness activities are available. Advantages include the benefits of prevention vis-à-vis curing, as well as speed and certainty of damage cover.