El Niño threat exposes insurance sector gaps

As Malawi braces for another potentially severe climate shock, the insurance industry says agricultural insurance remains largely untapped, with crop and other agricultural cover accounting for less than 10 percent of the market. Insurance Association of Malawi President Wales Meja said motor insurance continues to dominate the market, despite agriculture’s central role in Malawi’s economy and the vulnerability of farmers to adverse weather conditions. “Agricultural insurance uptake in Malawi remains relatively low, accounting for less than 10 percent of the insurance market. Motor insurance continues to dominate the market,” Meja said. He noted that agriculture in the country is largely driven by subsistence farmers, many of whom cannot afford insurance premiums on their own and require continued support from the Government and development partners through premium subsidies. This comes as concerns grow over the potential economic effects of the forecast Super El Niño , which is expected to hit Malawi in the next agriculture season, which could disrupt production and expose the country to further financial pressure. The African Development Bank estimates that the phenomenon could wipe out up to $20 billion globally. However, Meja said insurers were prepared to respond to major climate shocks through reinsurance arrangements and risk-sharing with other players locally and internationally. However, he said the effects of a major agricultural shock would extend beyond insured farmers. Agriculture policy analyst Tamani Nkhono Mvula said the majority of Malawi’s farmers were subsistence producers, making conventional insurance difficult to apply. “Insurance should cover what is commercial. So, it’s commercial farmers that should be thinking of insurance,” Mvula said. He also cited information gaps among farmers, in terms of specific insurance packages for the farmers and what kind of benefits the farmers are going to get. Economist Marvin Banda said the country should embrace agriculture insurance saying Malawi’s dependence on rain-fed agriculture made climate shocks an economy-wide risk. “The El Nino is an economic warning for us because agriculture employs over 80 percent of the population. So, the less than 10 percent market coverage should concern policymakers. “Most importantly, however, we should ask what happens to the other 90 percent when the rains fail,” Banda says. Malawi has already demonstrated the potential of insurance as a mechanism for cushioning vulnerable households from climate disasters. In August 2024, African Risk Capacity and African Development Bank provided the Malawi Government with a $11.2 million insurance payout following El Niño-induced drought. The payout was meant to support more than 350,000 households through food assistance and cash transfers. Meanwhile, the Ministry of Agriculture is set to undertake work on Index- Based Crop Insurance, Market Development and Delivery in Malawi, under the Africa Disaster Risk Financing Programme financed by the African Development Bank, according to information published in yesterday’s The Daily Times paper .
2026-08-18 13:04:52