Bermuda beat out competition from Switzerland to become the domicile of the first-ever African catastrophe insurance pool, Economic Development Minister Grant Gibbons told MPs today.

As reported yesterday on The Royal Gazette website yesterday, the ARC Insurance Company Ltd is a mutual insurance company established on the Island to provide drought coverage for five African countries: Kenya, Mauritania, Mozambique, Niger and Senegal.

The company was set up by African Risk Capacity (ARC), a specialised agency set up by the African Union to help member states become more financially resilient to extreme weather events and to protect insecure food populations. The capital was provided by the governments of the UK and Germany.

“I am pleased to say that Bermuda was selected over Switzerland as the best jurisdiction to locate this mutual insurance company after careful due diligence by a number of international agencies,” Dr Gibbons said in the House of Assembly. “It is possible that at some point in the future, the company may consider re-domiciling to Africa, depending on the wishes of the members and directors.”

Dr Gibbons revealed that ARC officials had visited Bermuda several times during the past 18 months, for talks with himself and financial regulator the Bermuda Monetary Authority. Marsh IAS, the insurance manager in Bermuda, Willis Group as reinsurance broker, and Appleby Bermuda, who assisted with ARC Ltd’s incorporation, are among others involved with the new company.

“Bermuda’s participation in this co-operative approach to assisting African countries is a strong vote of confidence for our country,” Dr Gibbons said. “Not only will ARC Insurance Company be domiciled here, but our involvement in the development of mutual insurance to assist African countries will provide targeted responses to disasters in a more timely, cost-effective and transparent manner.

“We are at the forefront in the formation of a fund that facilitates financial stability in instances where other insurance options are not available.”

He added: “In addition to the reputational benefit for Bermuda as the host jurisdiction, we believe there may be future opportunities for commercial business and jobs. Africa represents one of the fastest growing economies and there is clearly a potential for other insurance business being located in Bermuda.”

The insurance policies issued this month by ARC Ltd will provide a total of approximately $135 million in drought insurance coverage tailored to the specific requirements of the insured countries. In addition to its own capital, ARC Ltd has secured US $55 million of capacity from the international reinsurance and weather risk markets in order to cover the risks it is taking on from the participating countries.

The ARC Agency said the new insurance pool would make disaster-stricken African countries less reliant on international aid and also avoid the scenario of having to divert funds from important development projects to deal with an immediate crisis.

Henry Rotich, Kenya’s Cabinet Secretary for the National Treasury, said: “Droughts undermine our hard-won development gains, just as Africa is beginning to realise its vast potential.

“ARC will help us build resilience among vulnerable populations, protect our agriculture investments, thereby increasing productivity, as well as promoting fiscal stability by preventing budget dislocation in a crisis.”

Nigeria’s Finance Minister Okojo Iweala, chairman of the ARC Agency Board, described the formation of the Bermuda-based catastrophe insurance pool as “a transformative moment in our efforts to take ownership and use aid more effectively.

“It is an unprecedented way of organising ourselves with our partners, with Africa taking the lead — taking our collective destiny into our own hands, rather than relying on the international community for bailouts.”

Dr Gibbons told MPs: “I believe all Honourable Members can be proud that Bermuda and our on-island expertise have played such a key role in this important international initiative.”