The Wrong Model For Resilience: How G7-backed Drought Insurance Failed Malawi, And What We Must Learn From It

Author: Jonathan Reeves

Year: 2017

Category: Corporate Reports

Abstract

As a result of inadequate efforts from rich countries to reduce greenhouse gas emissions, we are already living in a world 1o C warmer than pre-industrial times: and climate change is affecting women living in poverty first and worst. This is a graphic tale of how an international attempt to support these people failed abysmally. In 2015, the Government of Malawi purchased a drought insurance policy for the 2015/16 agricultural season from the African Risk Capacity (ARC) Insurance Company Ltd, costing almost US$5m dollars. This decision was taken amidst a global wave of enthusiasm for climate insurance generated by the World Bank and the G7, with support from the insurance industry. Malawi then experienced severe drought across almost all of its districts, induced by a record El Niño, supercharged by climate change. This resulted in 6.5m people being assessed in May 2016 as requiring food assistance by the Government of Malawi with the support of UN agencies and NGOs.3 However, a pay-out from the drought insurance policy was not automatically triggered, as the model used by ARC calculated that only 20,594 people had been affected by the drought. This report tells the story of Malawi’s experience of the drought and its ARC insurance policy, based on focus group discussions and interviews with a wide range of Malawians, from rural communities to government officials and other stakeholders, as well as the ARC Secretariat, caught up in the drought that need not have become a disaster. The government officials we spoke to were senior officials with responsibility for providing advice and information to inform decisions made with respect to ARC insurance and associated policies from within the Ministry of Finance, Economic Planning and Development, the Department of Disaster Management Affairs, the Ministry of Agriculture, Irrigation and Water Development, and the Department of Climate Change and Meteorological Services. We also spoke to key local government officials in Rumphi and Mchinji districts, experts from the National Smallholder Farmers’ Association of Malawi (NASFAM) and the Lilongwe University of Agriculture and Natural Resources, and staff from ActionAid’s Local Rights Programmes and their local partners in Chiradzulu, Machinga, Nsanje, and Rumphi. Focus group discussions incorporating participatory research methodologies were held with rural communities in Nsanje and Rumphi. These sought to understand the perspectives of the communities – and in particular the women – on climate and disaster risks, their decision-making regarding agriculture and livelihoods, and the steps they had taken to build resilience to droughts, climate change and other disaster risks; on support provided to them by the government, NGOs and other development actors regarding agriculture, climate change adaptation, disaster risk reduction (DRR) and social protection; and on the impacts of the recent drought and other disasters. (The communities were asked about their experience with, and views about, various forms of insurance, but not specifically about ARC, since they knew nothing about it.) Our interviews and discussions took place in the time between the initial ARC decision not to make a pay-out and the revised decision in November 2016 to pay Malawi $8m: ARC and the Government of Malawi officials then had the opportunity to provide feedback on the draft report, which was taken into account in its subsequent revision, as were developments after the eventual ARC payment. The report is also informed by in-depth secondary research.

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