ARC $11.6m insurance payout to help Malawi farmers affected by El Niño-driven drought

The Government of Malawi and its Replica partner, the United Nations High Commissioner for Refugees (UNHCR), have received insurance payouts of just over $11.6 million from the African Risk Capacity (ARC) following the 2023/23 El Niño-driven drought.

The payout will support immediate humanitarian efforts to address food insecurity and reach the most vulnerable communities impacted by the extensive crop failures.

These were the result of a record-breaking dry spell, exacerbated by the El Niño weather pattern. Over 2 million farming households were impacted, leaving them to face food insecurity and in need of assistance.

Ahead of the 2023/24 planting season, the Republic of Malawi secured an anticipatory sovereign insurance policy with ARC Ltd, the insurance affiliate of the ARC Group.

The government’s participation in ARC climate risk insurance was facilitated by an insurance premium paid in part by the government and a premium support contribution from the African Development Bank (AfDB)’s Africa Disaster Risk Financing Programme Multi-Donor Trust Fund (ADRiFi-MDTF).

“The government is seeing results from its proactive and forward-thinking approach to managing natural disasters; the resources will play a crucial role in strengthening the resilience of the affected communities,” stated the Honourable Simplex-Chithyola Banda, Minister of Finance and Economic Affairs.

He added: “It is in moments like these that we can truly appreciate the role of sovereign insurance as an innovative financial instrument to help bolster Africa’s resilience,” said Lesley Ndlovu, CEO of ARC Ltd. “The southern African drought has tested the ARC concept, and we are proud to be enabling early response and coming to the aid of those in need.”

In addition to the government’s insurance policy with ARC Ltd, the UNHCR, a Replica partner, also took out a policy on behalf of refugees.

This was done through Replica’s innovative programme which allows humanitarian actors to purchase insurance on behalf of a country.

This collaborative approach ensures that more people in need, including refugees, can be reached with critical assistance. For the first time, forcibly displaced communities and their hosts were included in insurance, increasing the total number of those covered and protected.

Kouame Cyr Modeste, UNHCR Country Representative, said: “UNHCR is proud to have joined the ARC insurance risk pool for the first time in Malawi. The payout of just over $400 000 that we received will play a pivotal role in addressing the needs of refugees affected by the recent El-Nino induced drought.

“This funding will be used to enhance food security and improve the livelihoods of forcibly displaced persons and their host communities.”

In line with the Final Implementation Plan developed as part of the ARC contingency planning process, that guides the use of the payout, the government will use this fund to procure and distribute food aid.

Replica partner, UNHCR, will use the payout to complement the same activities and reach more people.

The combined payouts to the Republic of Malawi and Replica partner, UNHCR, are expected to have a significant impact on the ongoing humanitarian response to the drought, ARC highlighted.

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