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Last month refugees at Dzaleka, in Malawi, received funds that will help them prepare for the new agriculture season following one of the most challenging rainfall seasons in recent years, characterised by a delayed onset of rains and prolonged dry spells. Agriculture, a vital sector on which over 80% of the Malawian population relies for both subsistence and income, was hit hardest as subsistence farmers, whose livelihoods depend on the growth of staple crops such as maize, beans, and groundnuts, were left struggling to maintain production. Pastures and water sources that support livestock also dwindled, further adding to the challenges for communities already dealing with food insecurity.
These conditions, compounded by the El Niño phenomenon, constitute the largest humanitarian emergency that Malawi has ever confronted, with 6.5 million people in need of humanitarian aid. The country also hosts more than 52,678 persons of concern (PoC) and refugees, primarily from the Democratic Republic of Congo, Burundi, Rwanda and Mozambique, the majority of whom are dependent on humanitarian assistance to meet their daily food needs.
“Refugees and displaced people often live in temporary shelters or camps, which are particularly vulnerable to climate events. Many of these areas also face resource scarcity, and the added stress of climate change can lead to severe shortages, resulting in increasing tension and conflict within refugee communities,” says the UNHCR’s Mojisola Terry.
A key component of African Risk Capacity (ARC) Group’s response in Malawi has been its partnership with the United Nations High Commissioner for Refugees (UNHCR) through the Replica Programme, which allows humanitarian organisations to replicate government-level climate risk management policies, thereby extending insurance coverage to refugee populations and internally displaced persons who are typically left out of national insurance schemes.
Through the Replica programme, the UNHCR took out a policy on behalf of the refugees in the country that allowed them to receive a $400,000 payout. This includes Dzaleka, a refugee camp in the Dowa district of Malawi (about 40km away from the capital, Lilongwe), which receives a monthly average of 300 new arrivals (62% are from the DRC, 19% from Burundi, 7% from Rwanda, and 2% from other nationalities) – 45% of the PoCs are women and 48% are children. The camp was initially established to host between 10,000 to 12,000 PoCs but now hosts over 52,000 individuals. Of the total PoC population, 21,530 have refugee status, 30,910 are asylum seekers, with 238 others are of concern.
Residents like Ndayisenga Goodance (42) say they are grateful for the timely disbursement of funds. “The money will help us with inputs for maize, and I am going to save to have enough for inputs from the subsequent payments,” she says.
Ndayisenga Goodance
Nsabimana Janine (40) explains how the funds have allowed her to purchase fertiliser for her rented 0.8-hectare plot, where she grows maize and beans. Jean Rwasa (29), who grows tomatoes on 0.4 hectares of land, plans to use the money to buy 20 kg of fertiliser, which sells at MK2,500 per kg.
Nsabimana Janine Jean Rwasa
These individual stories highlight the tangible impact of the anticipatory insurance model, which aims to provide emergency relief and empower individuals and communities to rebuild their livelihoods.
Payout process: Ensuring access and transparency
Centenary Bank was contracted to oversee the payout process, which included:
This structured process ensured that the funds reached those most in need without delays or mismanagement.
The long-term impact of climate change on Malawi
Malawi, which occupies the southern part of the East African Rift Valley, is particularly prone to adverse climate disasters. Droughts and floods, the most severe of these hazards, have increased in frequency, intensity, and magnitude over the past twenty years, with dire consequences on food and water security, water quality, energy resources, and the livelihoods of the most rural communities.
These climate impacts date back to the late 1940s. In 1991/92, 6.1 million people were affected by droughts, and according to the World Bank, from 1979 to 2008, 21.7 million were adversely affected by natural disasters, with 2,596 livelihoods lost.
In 2015, Malawi was hit by a once-in-500-year flood, which impacted more than 1.1 million people. This was followed by a devastating drought that left over 6.5 million people without food during the 2016/17 season.
Malawi signed up as an ARC member state in 2015 to try and address the impacts of the flood and subsequent droughts. African Risk Capacity Limited (ARC Ltd.) worked closely with government representatives and other stakeholders to ensure the parametric model was tailored to the country's specific vulnerabilities. Using AfricaRisk View to monitor weather patterns and agricultural impacts, the insurance product was designed to trigger payouts when indicators reached thresholds that signalled potential disaster.
From November 2023 to April 2024, the country experienced less than 20% of its typical rainfall. Africa RiskView, ARC’s early warning software, recorded that approximately 4.7 million Malawians were directly affected by the drought conditions.
In March 2024, the government of Malawi declared a national state of disaster, and in April 2024, ARC Ltd.’s parametric insurance model was activated as the dry spells reached the threshold. This anticipatory insurance model allows for faster disbursement of funds and ensures that affected countries can implement pre-planned responses without waiting for lengthy damage assessments.
The Republic of Malawi received a $11.2 million payout, which was allocated to over 235,000 households in the Lower Shire and Southern regions where crop failures were the worst. Additionally, cash transfers were provided to approximately 118,000 households in the Central region.
The African Development Bank, which has signed a Memorandum of Understanding with ARC. to cooperate in preparing, developing, and implementing projects and programmes in climate change and risk resilience in member countries, financed the insurance payment through its African Development Fund and Africa Disaster Risk Financing (ADRiFi) Programme Multi-Donor Trust Fund.
Since its establishment in 2019, the ADRiFi programme has significantly contributed to the financial protection of over six million people across the continent, invested more than $100 million, and supported 16 African countries to access sovereign insurance and financial protection against climate hazards.
Building climate resilience long-term
ARC Ltd. provides parametric insurance services to AU Member States and farmer organisations, employing innovative financing mechanisms to pool disaster-related risk across Africa and transferring it to international risk markets. “Our parametric insurance model was designed to address climate-induced shocks,” explains CEO Lesley Ndlovu. “Unlike traditional insurance models, which only provide payouts based on verified damages after an event, parametric insurance is triggered by specific, pre-agreed conditions, such as rainfall deficits or temperature anomalies.”
While ARC Ltd.’s immediate focus in Malawi has been to provide relief in the aftermath of the 2023/24 drought, the longer-term goal is to help the country build resilience against future climate shocks. Its ongoing food security concerns have underscored the importance of timely, targeted financial interventions in responding to climate-induced disasters.
By using anticipatory insurance models, ARC Ltd. is helping countries like Malawi plan for and respond to disasters in a way that minimises economic disruption and protects vulnerable populations. This approach requires ongoing collaboration between governments and humanitarian organisations to expand coverage to more vulnerable communities and to ensure that payout funds are used effectively.
