Weather-based Insurance in Southern Africa: The Case of Malawi

This report lays out an overall food security policy context and analyzes the role of weather risk management techniques for food security at the national level, taking Malawi as a case study, and the regional level for the entire SADC region. Malawi was chosen as a case study because it is one of the more drought-prone countries in the region, and hence experiences chronic food crises, and is one of the members currently in the process of developing food security policy options. In addition, and rather significantly, Malawi is reputedly a sound source of weather-related data.

The study states that food security and weather risk management are inextricably linked: weather risk management, or the lack of it, determines the level of systemic risk in the food security system. The exposure to weather risk drives overall food insecurity. This systemic risk can be internalized and managed well and/or it can be transferred. First, society should manage the drought risk by adapting production, making markets function, establishing safety nets, and preparing for emergencies through ex-ante emergency risk management, all of which are explained in greater detail below. Secondly, people can transfer part of the risk out of the country for a premium at all levels: micro, meso, and macro.