As part of the World Bank's support to strengthen the ECOWAS Regional Food Security Reserve (RRSA) through the GRiF activities of Component 3 of the PRSF, a visit by WILLIS TOWERS WATSON to experts from the RAEA/ECOWAS, particularly those in charge of designing and implementing the risk transfer mechanism (the PIU team), took place from 03 to 05 June 2024 in Lomรฉ/Togo.
Discussions generally focused on the feasibility study for the risk transfer/financing instrument and on the instrument's potential, data and modelling.
After three (03) days of discussions, the WTW consultants and the RAAA experts agreed on the food security factors that should be considered as a priority, on a clearer vision of the type of potential instruments, on the definition and discussion of the type of data needed to assess food security and finally on the type of data/indicators/proxy that will be used to design the trigger index for interventions from the regional reserve.
Together, the ARAA and WTW experts defined the most important steps to be taken to finalise the instrument. It should be noted that these exchanges provided an opportunity for a better understanding of the requirements of the Reserve and ECOWAS with regard to the support mechanism and a clearer understanding of the requirements and preferences of the market (insurers and investors) with regard to these risks and these instruments.
Prior to the Lomรฉ meeting, the RAAA and WTW experts had jointly conducted a holistic risk assessment focusing on the identification and evaluation of the main structural and current drivers of food insecurity in the region, as well as indicators that could be useful, alone or in combination, as proxies for various elements of food insecurity in the ECOWAS region, both at national and regional levels.
WTW has consulted with the ECOWAS Regional Food Security Reserve (RFSR) team to review and reach a common understanding of the various aspects of the RFSR, including financial costs, disbursement history (countries, dates of distribution, food commodities and volume distributed, number of beneficiaries), purchase agreements already in place, and any data gaps and liquidity constraints. WTW will use the information collected to estimate the number of beneficiaries currently reached, the number yet to be reached and the number that could be reached through the implementation of the financial mechanism(s) proposed to extend the scope of the RFSR.
The feasibility study on the risk financing instrument for the ECOWAS Regional Food Security Reserve (RFSR) is a GRiF-funded activity exploring the feasibility of designing and implementing a risk transfer solution for the RFSR to improve the resilience of the regional reserve against the main food insecurity risks. The RFSR responds to food insecurity induced by various sources of food crises, including agro-climatic shocks, socio-political conflicts or crises, health crises (Ebola, Covid-19) and sudden food price shocks. The RFSR is designed to complement national food security response mechanisms.
Such an instrument would be a unique structure, providing a demonstration effect for new financing mechanisms for development. With the right framework, it can catalyse increased funding for the food reserve system, including food stock infrastructure and management, by attracting private capital to complement contributions from donors and ECOWAS member states. A wide range of financial instruments are being considered, from insurance solutions and bonds to commodity options.
Following the meeting in Lomรฉ, future actions include the organisation of a round table between WTW, the GRiF team and insurers to gauge their appetite for the potential instrument, as well as the selection of data and development of the index.