LILONGWE-(MaraviPost)- The Malawi Government made the wrong risk in purchasing the US$5 million Insurance from African Risk Capacity (ARC) to cover for the 2015/2016 el-Nino impact, with revelation that the insurance proceeds were too late and too little to avert the situation, The Maravi Post has learnt.
This has prompted ActionAid Malawi to advise the Government to tread carefully with regard to disaster risk management, especially the impact on rural farmers and women.
In a report the organization released on Thursday this week, titled “African Risk Capacity Insurance: How drought insurance failed Malawi, and what we must learn from it,” gives a snapshot of the whole policy that was hoped would provide the country with rapid assistance in the event of a drought.
The ActionAid study analyses what went wrong with the ARC insurance policy, and why. The report then draws lessons and makes recommendations for the UNFCCC, the G7, G20, and governments, Malawi inclusive.
The report also targets the organizations involved in the promotion, design, and implementation of climate and disaster risk insurance, including in the context of implementation of the Sendai Framework for DRR, the Paris climate agreement, and the Sustainable Development Goals (SDGs).
The study reveals that the insurance, for which Malawi paid US$5 million, failed to deliver on its promise of timely assistance. It highlights that 6.7 million food-insecure Malawians so sorely needed, but due to major defects in the model, data and process used to determine pay-out, it came in too little, too late.
After the declaration of a national emergency in April 2016, an outrage at ARC’s decision that no pay-out was warranted, was eventually followed by an agreement in November to pay Malawi $8 million.
But this payment was made only in January 2017; it was too little, too late and effectively represented an economic loss to Malawi.
Eventually the Malawi Government was left with using conventional means of raising money to buy food for its hungry citizens, with the total drought response costs estimated at $395 million.
Addressing a news conference on the sidelines of the report launch in the capital Lilongwe, ActionAid Malawi Acting Executive Director, Mohammed Sillah, advised the country’s authorities that to avoid loss of public funds, they should consult thoroughly on food security and resilient approaches.
Sillah said buying ARC insurance was not of any value for the country’s money, as the proceeds did not benefit rural farmers including women and young people, who are vulnerable to the effects of climate change such as drought.
He therefore, advised the Malawi Government to promote and expand climate risk insurance markets for the poor and vulnerable, should pause arguing that lack of evidence of its equity and effectiveness and indications that it may be exacerbating inequality and vulnerability.
The Acting CEO added that ARC’s African members should be recognized for their solidarity, and leadership in stepping up to filling the gap in international support for adaptation.
Sillah also asked the Government and other development partners, to instead promote a rights-based, equitable, effective, and empowering alternative model for climate risk financing. He named a few being, supporting the development of cooperatives, backstopped by adaptive, scalable social protection systems, plus an equitably and predictably financed global mechanism for social protection, and early response to crises.
“Social protection and agricultural support should be adapted, and aligned to help rural people living in poverty, particularly women, organised themselves into cooperatives, and use these to foster climate-resilient, sustainable, diversified agriculture, and livelihoods, including through member-owned savings, loans and, after attaining sufficient capacity, insurance schemes.
“The G7, World Bank, Insurance Development Forum, ARC, and others promoting the expansion of climate risk insurance markets for the poor, and vulnerable, should pause and reconsider this quest in the face of a lack of evidence of its equity and effectiveness, and indications that it may be exacerbating inequality and vulnerability,” Sillah said.
Expressing her concerns over the ARC Insurance failure, Ellen Matupi, National Coordinator for Coalition of Women Farmers in Malawi, said the policy proceeds could have benefited Malawians, if they had been paid in time; noting that currently women resorted to other means to avert the effects of the drought.
Matupi therefore, asked the Government to empower women economically, through cooperatives, unions, and association in business for the direct benefits rather than buying insurance.
The Ministry of Energy, Mines and Natural Resources spokesperson Sangwani Phiri, who is responsible for Climate Change Management, asked for more time to read the report before his ministry could respond to it.