The Next Flood Will Be Worse. Are We Ready to Pay the Bill?

Ghana has seen more than thirty major floods since independence, and more than half of them have hit Accra alone. Lately they come faster: 2022, 2023, 2025, and now 2026. This year, the President said, about 140 millimeters of rain fell on the city in a single day, more than double the heaviest single day recorded the year before. So the rains aren't just more frequent. They are getting heavier. Which tells me we can safely assume, for planning purposes, that the next big flood that hits Accra will be worse than this one.

There's already been plenty of talk about how to prevent flooding: dredging, decongestion, removing tiles, planting trees. I'll leave that debate to others. What I want to look at is something we discuss far less: how we finance disaster response and whether government is financially ready for the next big disaster.

Here's where we stand. In 2025, the Finance Minister told Parliament that the government had procured sovereign drought insurance for the 2025/26 farming season, and that, in the 2026 Budget, it had committed to adopt a Parametric Flood Insurance Scheme for Greater Accra, one meant to protect 1.2 million vulnerable residents.

Let me break down how that flood cover works. When a flood hits, the insurer, which in this case is Allianz, uses satellite imagery to measure the water level, and once it crosses an agreed threshold, a payout is triggered. That money goes to the Finance Ministry, which then passes it to NADMO. This payout to NADMO makes me a little uncomfortable.

Why?
The reason is that NADMO is both the disaster-prevention and the disaster-management arm of the Interior Ministry, and I think that dual role is the problem. Its annual operational budget, meaning the money for actual disaster work as opposed to salaries, runs to around GH¢10 million (about $1 million) a year, for an agency responsible for all sixteen regions. For context, the drought policy paid out about $2.9 million, almost three times NADMO's entire operating budget. Inside the GH¢12.1 billion Interior Ministry, NADMO is simply a rounding error.

So here you have an agency that's starved between disasters and only sees real money once one hits. This sets up a problem in economics called moral hazard. Moral hazard is what happens when being insured changes how you behave. If your phone is insured, for example, you may handle it a little more carelessly, because someone else now carries the cost of repairing it.

So, putting disaster prevention and response inside the same cash-starved agency creates a moral hazard. On the one hand, prevention is thankless and unfunded. On the other, a flood brings a payout, which makes the disaster a revenue event, a payday for the agency and its contractors. So, before we talk about any financial preparedness, I'd encourage Parliament to separate the two mandates. Ideally, we should push prevention out to the MMDAs. They're closest to the problem, and they already control building and planning. Let them bake disaster prevention into how they permit and develop land.

OK, now the money
When the June 2026 floods came, the government released GH¢300 million from the Contingency Fund for response and mitigation. That was fast, and I'll credit it. But it leaves me with more questions. When the worst flood we've ever seen finally arrives, will the cash be there without robbing every other development priority? Will it be fast enough, and big enough, to matter? I think the honest answer is no. And to see why, imagine a genuinely bad year.

Imagine one bad year, and this year is already bad

Picture 2027. In June, the rains break records again, and floods hit not just Accra but three regions at once. That December, northern Ghana suffers an unprecedented drought that pushes smallholder farmers into crisis. And suppose that, as seismologists keep warning, the fault line under Accra finally moves. The city sits in a genuine earthquake zone, and the last big quake, in 1939, flattened parts of it.

None of that is a doomsday prophecy. Each of those things has happened before. What Ghana has never planned for is more than one of them landing in the same fiscal year. And that's precisely where the Contingency Fund breaks, because it's a single pot meant for every national emergency at once.

What financial preparedness looks like

So what would readiness actually look like? The answer is a discipline called risk layering, and the idea is simple. You don't cover every loss the same way. You match the tool to the size and rarity of the disaster, then stack the tools so each one catches what the layer below it can't hold. Government should build four layers.

A ring-fenced disaster reserve fund. This is real savings, set aside in advance in a dedicated account, separate from the general Contingency Fund, to absorb the frequent events: the market fires and the floods that come most years. Ring-fenced is the key word. The money can only be spent on disasters, so responding to one doesn't cannibalise every other emergency.

Contingent credit. Above that, a pre-arranged line of borrowing that costs nothing until a disaster triggers it, then releases cash at once. The World Bank sells exactly this. It's called a Cat-DDO, a catastrophe drawdown option.

Parametric insurance. This is the layer the minister announced. Satellites measure the water level, and a payout triggers when it crosses a threshold. It's the right tool for events too big for the reserve but short of once-in-a-generation.

A catastrophe bond. And for the truly extreme event, you hand the risk to the capital markets. Investors buy a bond. If the catastrophe hits, they lose their money and it pays the government. If it doesn't, they earn their interest. That's how you cover a disaster too big for any insurer to carry alone. Together, these push most of the risk off the government's own balance sheet, so that a bad year isn't paid for entirely out of our own pocket.

But Insurance don’t always pay
Layers only help if the contracts actually pay when they should, and that isn't guaranteed. Jamaica spent a decade building what its own planners call a financial fortress, catastrophe bond included. Then Hurricane Beryl hit in 2024, and the bond paid nothing. The storm passed just south, and the air-pressure readings where the bond was written never crossed the trigger. That gap, between what the instrument measures and what actually happens on the ground, has a name: basis risk. Jamaica survived anyway, because the bond was only its top layer, and the reserves and insurance beneath it carried the cost.

Malawi is the cautionary tale. In 2016, a drought pushed six million people into hunger, and the African Risk Capacity, the very facility Ghana buys its drought cover from, refused to pay. Its model assumed a variety of maize that wasn't the one the drought destroyed. After the outcry, ARC recalibrated after the fact and paid $8.1 million, against a disaster that cost Malawi's government $395 million. And that's the uncomfortable truth: Ghana today looks closer to Malawi than to Jamaica.

What can we do better?
So, two things. First, push both the buying and the incentive down to the districts. Rather than one central policy for all of Accra, let the government negotiate wholesale cover and have each District Assembly buy in, with its premium priced on its flood risk and its prevention effort. An assembly that clears its drains and refuses floodplain permits pays less. One that sells wetlands pays more. That moves the money past the central bottleneck, and it turns the premium into a prevention incentive right where land use is decided. And remember, the payout still goes to the disaster-response entity, not the Assembly. Second, design against basis risk. Calibrate the triggers to Accra's real flood footprint, insist on a gap clause that still pays when the trigger just misses,and demand independent recalibration rights, so Ghana is never at the mercy of the modeller the way Malawi was. None of this means walking away from insurance. It means refusing to mistake one clever policy for a plan.

The flood that tests Ghana hasn't come yet. Whether the money is there when it does, fast enough, big enough, and still there when the second disaster hits the same year, is still, for now, a choice.

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