Facing climate change, Nigeria's Lagos state takes out flood insurance

Nigeria's Lagos state has taken out a $7.5 million flood insurance policy to cover millions of people, the Insurance Development Forum said Thursday, as the country's economic capital faces rising sea levels and floods linked to climate change.

The coastal mega-city of Lagos and its estimated more than 22 million inhabitants are among those facing the brunt of climate change in coastal west Africa, where oceans are rising, rainfall is becoming erratic and urban populations are booming.

In a statement, Governor Babajide Olusola Sanwo-Olu warned that inaction on climate change could cost the wider state government around $40 billion by 2050, "with severe consequences for our people, infrastructure and economy".

"Our wetlands and biodiversity are also under threat. These realities demand urgent action," he said.

The policy's premium was financed to the tune of 90 percent by InsuResilience Solutions Fund - which is itself financed by Germany - with Lagos state covering the remainder.

It covers up to four million people across seven local government areas in the state, including for government disaster relief as well as direct cash transfers to affected communities.

The Lagos-funded portion is set to increase in the second and third year of the policy. The scheme is a form of parametric flood insurance, which pays out under certain conditions - such as a specific amount of rainfall, captured via satellite image - instead of at a certain level of damage, which can take time to assess.

It wasn't immediately clear what the payout trigger would be, but the Insurance Development Forum - a body affiliated with the United Nations Development Programme and the World Bank Group - said the insurance was "a major milestone" in a state where 80 percent of households are low-income and "insurance penetration is below 0.5 percent".

Lagos, the most populous city in Africa's most populous country, is sinking, and is threatened by floods linked to climate change as well as poor management of waterways and expanding industry that eats up shorelines and wetlands.