Malawi receives over $3.3m insurance payout from ARC, addressing drought impacts

The Government of the Republic of Malawi has received a total insurance payout of USD $3,376,783 from the African Risk Capacity (ARC) Group, a specialised agency of the African Union that helps member states manage the risks associated with extreme weather events and natural disasters.

This payout follows a severe drought that affected the country’s 2024/2025 agricultural season and represents another key milestone in Malawi’s commitment to building resilience against climate shocks.

To prepare for potential climate-related threats during the 2024/25 farming season, Malawi secured two insurance policies from ARC Ltd, the financial affiliate of the ARC Group.

These included a traditional sovereign drought insurance policy and an anticipatory insurance policy, designed to enable early action in the event of forecasted planting failures.

The policies resulted in payouts of USD $3,065,746 and USD $311,037 respectively. The anticipatory coverage, in particular, allowed the government to act swiftly and limit the impact of the drought before it escalated further.

According to the Final Implementation Plan developed through ARC’s contingency planning framework, the Government of Malawi will allocate the traditional policy payout to expand social support interventions, including food distribution and cash transfers, reaching more than 311,000 people (69,179 households).

The anticipatory payout will be directed toward livelihood recovery efforts by providing drought-tolerant seeds and inputs for winter cropping, targeting 3,255 households.

Malawi’s insurance coverage through ARC was made possible with financial backing from international partners. The premium for the traditional drought policy was supported by the African Development Bank (AfDB) through the Africa Disaster Risk Financing Programme Multi-Donor Trust Fund (ADRiFi-MDTF), while the anticipatory policy was funded by KfW on behalf of the German Government.

The Government of Malawi expresses deep gratitude to both the AfDB and KfW for their continued partnership in advancing climate risk financing and resilience.

The Minister also thanked donors to the ARC Group for their critical role in sustaining the initiative. The ongoing dry spell in Malawi, building on the effects of the previous season’s El Niño-induced drought, has led to widespread crop losses and worsened the hardship facing many farming communities.

The insurance payouts arrive at a crucial time, offering immediate relief while underscoring the importance of long-term strategies to reduce vulnerability and strengthen national preparedness systems.

Hon. Simplex Chityola Banda, Malawi’s Minister of Finance and Economic Affairs, said: “The ARC payout always comes in when we need it the most. This is why the Government of Malawi is committed to strengthening the ARC initiative. This will involve two core actions: mobilising more premiums to increase insurance coverage, and supporting ARC sustainability through voluntary contributions and membership fees payment.”

“We commend the Government of Malawi for its foresight and leadership in embracing climate risk insurance as a vital tool to protect its people,” commented David Maslo, CEO, ARC Ltd.

“Our thoughts are with the families and communities affected by this drought, and through this payout, we stand with them. At ARC Ltd, we remain deeply committed to innovating solutions that empower African countries to anticipate, prepare for, and respond swiftly to climate shocks,” he continued.

Albert Mafusire, Principal Country Economist, added: “The African Development Bank is financing Malawi’s national disaster insurance through its ADRiFi Programme to build the country’s resilience to climate change. This proactive strategy ensures that rapid, predictable funds are available following disasters like floods or droughts. The primary goal is to protect the livelihoods of vulnerable populations, particularly smallholder farmers, and safeguard the nation’s overall development.”

“We are grateful for the continued efforts to strengthen Malawi’s resilience. The collaboration between the Government of Malawi, our partners, and the ARC Group is a powerful testament to the importance of partnerships in advancing climate response across the continent,” said Dr. Jean Chrysostome Ngabitsinze, ARC Group Director General.

He continued: “Malawi fully recognises the impacts of climate change and has taken deliberate steps to ensure its preparedness to respond.”

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