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The goverment of Malawi has received a $3.3 million (approximately K6 billion) insurance payout from the African Risk Capacity (ARC) to address the ongoing drought crisis. This payout, part of the 2024/2025 drought insurance policy, is crucial for disaster preparedness and response, notably in mitigating the impact of climate risks like droughts.
The funds will help bridge a financing gap as over 5.7 million Malawians face hunger due to poor harvests caused by prolonged dry spells.the Minister of Finance and Economic Affairs, Simplex Chithyola Banda, highlighted the timely nature of the funds for assisting vulnerable communities.
The ARC Insurance Board Chairperson, Dr. Maxwell mkwezalamba, explained that the payout was triggered by data indicating rainfall shortages and their impact on crop production. The total payout includes $3 million in customary sovereign insurance and $311,000 in anticipatory insurance, released early based on warning signals.
The African Risk Capacity, an African Union agency, provides risk insurance solutions to African countries facing weather-related shocks, enabling more effective disaster management. The Minister of agriculture, Sam Kawale, emphasized the importance of agricultural risk insurance in the context of worsening climate change, noting that the policy was purchased to protect farmers from devastating losses due to unpredictable weather.
The premiums for the traditional policy were funded by the African Development Bank (AfDB),while the anticipatory insurance premium was covered by the German Government through KfW. The Malawi Vulnerability Assessment Committee (MVAC) had previously reported a significant drop in crop yields due to below-average rainfall.
Malawi’s ARC insurance model is part of a continental strategy to reduce reliance on international humanitarian aid, allowing countries to receive payouts quickly after a disaster is confirmed and respond more strategically. The government plans to channel these funds through targeted food assistance and social protection programs for the most vulnerable populations.