Lilongwe, Malawi – 25 July 2025: Today, the Government of the Republic of Malawi has received an insurance payout from the African Risk Capacity (ARC) Group to the sum of USD $3,376,783, following a drought that affected the 2024/2025 agricultural season. This marks another significant step in the country’s proactive efforts to manage climate-related risks and protect vulnerable communities.
In preparation for the 2024/25 planting season, the country 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. The policies resulted in payouts of USD $3,065,746 and USD $311,037 respectively. The use of anticipatory solutions is an innovative way of insurance that allows for early response to a failed planting season.
In line with the Final Implementation Plan developed as part of the ARC contingency planning process which guides the use of ARC payouts, the Government of Malawi will use the traditional sovereign policy payout to scale up social protection measures through food distribution and cash transfers just over 311 000 beneficiaries (69 179 households). The anticipatory insurance payout will support livelihood-enhancing options by providing drought-tolerant crops for replanting and inputs for winter cropping for 3255 households.
The Government of Malawi’s participation in ARC climate risk insurance was facilitated by an insurance premium paid through support from the African Development Bank (AfDB)’s Africa Disaster Risk Financing Programme Multi-Donor Trust Fund (ADRiFi-MDTF) for the Traditional Sovereign Drought Policy, and KFW on behalf of the German Government for the Anticipatory Insurance Policy.
The Government of Malawi wishes to express its sincere appreciation to the African Development Bank (AfDB) and KfW for their invaluable support and partnership in advancing climate resilience and disaster risk financing efforts in the country.
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”
The Minister expressed deep appreciation for the ARC Group donors for supporting the ARC initiative.
The prolonged dry spell in Malawi, an extension of the previous season’s devastating El Niño-induced drought, has led to widespread crop failures, and deepened the vulnerabilities of farming communities that are still struggling to recover from the successive droughts. Many affected households now face acute food insecurity and require urgent assistance, underscoring the critical need for layered social safety nets and long-term resilience building.
“We commend the Government of Malawi for its foresight and leadership in embracing climate risk insurance as a vital tool to protect its people,” said 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 said “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. “Malawi fully recognises the impacts of climate change and has taken deliberate steps to ensure its preparedness to respond,” he concluded.
The combined payouts of the traditional and anticipatory sovereign insurance policies will complement other ongoing country and humanitarian response to the drought.
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Media Contact
For African Risk Capacity Group: Michele Karambiri, Head of Communication, ARC Group, Email: michele.karambiri@arc.int