51 ARC Ltd. and the Malawi Government co-designed the insurance product to align it with the country’s existing triggers for the scale-up mechanism, while the World Bank and the Global Shield Financing Facility provided the funding. By connecting the SCTP to ARC Ltd.’s disaster risk financing instruments, a shock-responsive mechanism was created to scale up early cash-transfer to additional beneficiaries when low rainfall and food insecurity indicate a looming drought. 75% OF THE POPULATION LIVES BELOW THE INTERNATIONAL POVERTY LINE Reducing disaster costs According to the policy structure, the Malawi Government retains some of the risk through their contingency fund. At the same time, ARC’s Sovereign insurance policy covers some of the government’s other response costs in the event of a severe drought. Combining financial instruments in this way and following a risk-layering approach helps address disaster response costs. In the 2022-2023 agricultural season, coverage was expanded to six districts, insuring 500 000 people against the impacts of drought. In the 2023/24 and 2024/25 seasons, the new insurance product will be partly used to cover the costs of scaling up the SCTP should the rains be poor and be complemented by the contingency financing. The Malawi project showcases how diverse financial instruments can be optimised to enhance a country’s disaster risk financing strategy. The innovation also exemplifies ARC Ltd.'s commitment to developing flexible, localised solutions and helping governments diversify their DRF portfolios with products that are fit for purpose. Importantly, it provides a model for building climate resilience that can potentially be replicated across Africa. 500 000 PEOPLE INSURED AGAINST THE IMPACTS OF DROUGHT NON - SOVERE I GN BUS I NESS – MALAWI
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