Malawi - "Maize is our life"

Malawians can often be heard saying “chimango ndo moyo” (maize is our life). No big surprise coming from the population of the world’s largest maize producer and the African country with the highest per capita maize consumption. So when drought strikes, for example as it did in 2005, the threat to Malawian farmers and the society in general has catastrophic dimensions.

The World Bank and the Government of Malawi worked together to structure the innovative contract based on an index linking rainfall with maize production and offers Malawi an affordable means of hedging against weather risks. Within the framework of this partnership, Swiss Re commits to a maximum payout of USD 5 million to the Government of Malawi if maize production drops to 10% below the historical average due to rain shortfall. As well as minimising weather-related financial risks, the contract offers support in reducing food insecurity caused by a maize shortage.

This dynamic weather risk management instrument integrates daily rainfall data from 23 weather stations across Malawi into its predictions. It also uses the well-documented information available on the severe droughts experienced in the region in 2005, 1995, 1994, and 1992, when no timely cash payments could be made due to the lack of insurance. Should history repeat itself in the years to come, Malawi is set to reap significant rewards from an exemplary pre-emptive approach to disaster risk management.