Emergency aid is broken. Insurance will help us fix it

In 2017, we’ll recognise that the way we respond to crises overseas is broken – and that insurance can help to fix it. 

Emergency and humanitarian aid are falling woefully short of need. The UN closed 2016 asking for more than $22 billion to tackle crises in over 30 countries, its largest appeal in history. Just a fraction of this will be met.

This aid arrives after things go wrong. That undermines planning: it’s hard to make a plan without a budget. Promised aid often doesn’t show up and is split into small amounts when it does, gumming up delivery of vital assistance with expensive red tape. 

Worse, we don’t spend enough on reducing the damage from disasters. It would be better to spend money on flood defences than on giving people help after their home has been destroyed. But we wait until a disaster is on our screens before opening our wallets: a failure of response follows a failure of funding. As a result, we do not invest enough in things – like pre-positioning supplies – that would save lives, money, and time when crises hit.

So the problem for emergency aid is how, not just how much. In 2017, agencies will innovate by learning lessons from risk financing in general and insurance in particular. Insurance contracts can be calibrated to pay out for specific risks, in specific amounts, to specific actors, as and when money’s needed. 

That enables us to pay a bit today for much more certainty tomorrow rather than saving for unknown crises by underspending on current ones or frantically fundraising when they arrive. The result is much more bang for our buck. 

The African Risk Capacity is a government-run insurance pool for sub-Saharan African countries. It pays out when surface temperatures and an absence of rainfall point to an oncoming drought. Africa’s ARC sits alongside similar schemes in the Caribbean and the Pacific. These and other pilots show that the approach works. 

We can ramp up this approach to fix emergency aid’s deeply well-intentioned but badly underperforming business model. This year, more frontline agencies will invest in these contracts, and donors will scale up pilot schemes. Covering the predictable portions of emergency aid will free up badly needed cash for other areas of humanitarian response. It will more reliably get vital help to people who need it. And it will enable us to do more good for less money.