The African Risk Capacity (ARC), a provider of parametric disaster insurance products to countries and other entities in Africa, has made a US $3,376,783 payout to benefit Malawi after the parametric drought cover was triggered during the 2024/2025 agricultural season.
In preparation for the 2024/25 farming season, Malawi secured a traditional sovereign insurance policy as well as an anticipatory insurance policy with ARC Ltd, the insurance arm of the ARC Group, to protect itself against drought.
Moreover, the policies resulted in payouts of USD $3,065,746 and USD $311,037 respectively, both of which were received by the Government of the Republic of Malawi.
The anticipatory coverage, specifically, allowed the government to respond 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, which includes food distribution and cash transfers, reaching more than 311,000 people (69,179 households).
Furthermore, the anticipatory payout will be directed toward livelihood recovery efforts by providing drought-tolerant seeds and inputs for winter cropping, targeting roughly 3,255 households.
It’s important to note, that 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 insurance policy was funded by KfW on behalf of the German Government.
Hon. Simplex Chityola Banda, Malawi’s Minister of Finance and Economic Affairs, commented: “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.”
The Minister also thanked the ARC Group donors for their critical role in sustaining the initiative.
The ongoing dry spell in Malawi, which builds on the effects of the previous season’s El Niño-induced drought, has led to widespread crop losses and deepened the vulnerabilities of farming communities that are still struggling to recover from the successive droughts.
David Maslo, CEO, ARC Ltd, said: “We commend the Government of Malawi for its foresight and leadership in embracing climate risk insurance as a vital tool to protect its people. 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.”
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.”
Dr. Jean Chrysostome Ngabitsinze, ARC Group Director General, said: “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. Malawi fully recognises the impacts of climate change and has taken deliberate steps to ensure its preparedness to respond.”
