The Government of Malawi has received a $3.3 million (about K6 billion) insurance payout from the African Risk Capacity (ARC) to help cushion the impact of the ongoing drought crisis affecting millions in the country.
This payout, made under the 2024/2025 drought insurance policy, is part of the country’s disaster preparedness and response programme, which helps governments manage climate risks like droughts and floods. Though smaller than last year’s $11.2 million payout linked to the El Niño weather event, the government says the money is timely and critical to ongoing efforts to respond to widespread hunger.
Speaking at the cheque presentation ceremony held in Lilongwe, Malawi’s Minister of Finance and Economic Affairs, Simplex Chithyola Banda, said the funds will go a long way in bridging the current financing gap. He revealed that over 5.7 million Malawians are at risk of hunger due to poor harvests caused by prolonged dry spells during the farming season.
“It has come at the right time when government is under pressure to mobilise resources to assist vulnerable communities. This money will help us to respond quickly and more effectively,” Chithyola Banda stated.
Chairperson of the ARC Insurance Board, Dr. Maxwell Mkwezalamba, who handed over the cheque to the Malawi government, said the payment was triggered by data and analysis on rainfall shortages and the resulting impact on crop production across Malawi.
He explained that the total payout consists of $3 million (K5.3 billion) under the traditional sovereign insurance cover and an additional $311,000 (K544 million) under anticipatory insurance, which is released in advance based on early warning signals.
According to Mkwezalamba, “This payout is designed to help government respond faster to those affected, especially in hard-hit rural communities facing food shortages due to the drought.”
The African Risk Capacity is a specialised agency of the African Union that provides innovative risk insurance solutions for African countries exposed to weather-related shocks. It enables member states like Malawi to plan, prepare and respond to natural disasters more effectively.
Also speaking at the event was Minister of Agriculture, Sam Kawale, who stressed the importance of agricultural risk insurance in the face of worsening climate change. He said the policy was purchased on behalf of Malawian farmers, many of whom face devastating losses year after year due to unpredictable weather conditions.
“This insurance policy is part of government’s long-term strategy to protect farmers and ensure food security. Climate change is real, and we are seeing more frequent and severe disasters. So, we must prepare for them,” said Kawale.
Funding for the premium of the traditional insurance policy was provided by the African Development Bank (AfDB), while the premium for the anticipatory insurance policy was covered by the German Government through KfW, a German development bank.
The Malawi Vulnerability Assessment Committee (MVAC) had earlier reported a significant drop in crop yields across the country this year due to below-average rainfall in most districts. Maize, the staple food, was among the worst affected crops.
Malawi’s insurance model under ARC is part of a broader continental approach aimed at reducing dependence on international humanitarian aid after disasters. Instead of waiting for slow-moving external relief, countries like Malawi can now receive payouts within weeks after a disaster is confirmed, allowing them to act faster and more strategically.
Government officials confirmed that the funds will be channelled through targeted food assistance programmes and social protection interventions aimed at the most vulnerable populations, particularly in drought-hit rural areas.
