Parametric insurance can play a vital role in east Africa’s battle with severe drought and rain

From late March to May, east Africa experienced severe flooding as a result of exceptionally heavy rainfall during the “long rains” season.

Nearly 1.6 million people were affected across multiple countries, including Kenya, Tanzania, Burundi, Somalia and Ethiopia. Tens of thousands of homes were affected, with more than 480,000 people displaced and 528 fatalities reported.

In addition, the flooding caused significant damage to infrastructure and agriculture.

This event marks the second instance of severe flooding to occur in six months, following heavy rainfall during the “short rains” season (October to December) in 2023.

From 2020 to 2023, east Africa experienced a drought that caused food insecurity, particularly in the Horn of Africa. The prolonged drought hardened the soil, reducing infiltration and increasing runoff, which worsened the 2023 flooding.

The rainy seasons in east Africa are primarily influenced by the seasonal movement of the Intertropical Convergence Zone, a belt of low pressure that moves north and south of the equator and brings rain as it passes over the region.

Seasonal rains are also affected by major climate patterns, namely the Indian Ocean Dipole (IOD) and El Niño-Southern Oscillation. When sea surface temperatures are warmer in the western Indian Ocean, the IOD is in a positive state, which can increase rainfall in east Africa.

When this occurs simultaneously with El Niño conditions, as it did in early 2024, rainfall can become much heavier, with annual accumulations exceeding 200% of the average.

Another consequence of these meteorological conditions was the formation of two rare tropical cyclones in May, which brought heavy rainfall to east Africa’s coastal regions, causing additional flooding. Tropical Cyclone Hidaya made landfall on Tanzania’s Mafia Islands archipelago, while Tropical Cyclone Ialy, despite staying offshore, affected Kenya’s coastal areas.

Severe impacts

Some of the worst flooding occurred in urban areas. For example, in Nairobi, Kenya, weather stations recorded between 500 mm and 798 mm of rain in April, compared with a monthly average of 150 mm. On April 28, almost 120 mm fell in 24 hours, causing severe flooding, especially in informal settlements. Since 1986, Nairobi’s population has more than doubled, with more than 60% of the residents living in just 6% of the city’s area in tightly packed informal settlements. Despite recent improvements, these areas have a high ratio of impermeable surfaces and poor drainage and are particularly vulnerable to flooding.

The impacts in cities such as Nairobi highlight the need for proactive risk management to protect citizens from flooding and other climate-related impacts. Many urban areas are already taking action to boost their resilience to such events, as detailed in a recent report by C40 Cities and WTW.

The recent flooding also damaged major highways, roads and bridges across multiple countries, hampering transportation and access to affected areas. Additionally, electricity infrastructure and water treatment plants were affected, leaving some communities without access to power and clean water.

Cities were not the only areas hit by flooding. In late April blocked pipes trapped water behind an embankment, which gave way in Mai Mahiu, a town in Kenya’s Rift Valley. The resulting wave swept through several villages at night, leading to more than 60 deaths – many of which were caused by landslides as well as flooding. This highlights the need for infrastructure maintenance, especially under the strain of extreme weather events.

Thousands of hectares of cropland were also submerged or destroyed by the floods, damaging irrigation systems, pumps and pipes and affecting food security and horticultural exports, which are vital to the local economy.

Building financial resilience

The extreme rainfall in east Africa and the associated flooding, secondary perils (for example, landslides) and cascading impacts (for example, embankment collapses) highlight the need for quantitative risk assessments, which can form the basis for comprehensive disaster risk management strategies. Such strategies can address all phases of the risk management cycle, which includes preparedness, response, recovery and reconstruction. To ensure timely implementation, these strategies must be accompanied by robust disaster risk financing (DRF) approaches.

One form of DRF gaining traction is parametric insurance. Unlike traditional indemnity insurance, parametric insurance pays out based on a pre-agreed trigger threshold (for example, amount of rainfall over a 24-hour period, measured at a specified rain gauge). This strategy bypasses the need for a lengthy loss adjustment process, which allows funds to be quickly released to the policyholder.

In the case of a city, these funds could be used to finance emergency response activities such as clearing debris, restoring critical infrastructure and supporting displaced people. For example, such an approach has been developed for the city of Medellín, Colombia, to finance emergency response actions following earthquakes, rainfall-related flooding and landslide events.

At the sovereign scale, the African Union’s African Risk Capacity provides parametric insurance policies for drought, flood and tropical cyclone hazards. Such multi-country risk pooling arrangements (which also exist in the Pacific, the Caribbean and south-east Asia) help to build insurance capacity and can achieve more affordable and stable insurance pricing, which is important to encourage enduring resilience to climate-related risks.

Neil Gunn is head of flood and water management research at WTW Research Network and Jamie Pollard is associate director for disaster risk finance at WTW