National Drought Insurance for Malawi

Nucifora, Antonio ; Syroka, Joanna

World Bank, Washington, DC

关键词: ACCOUNTING;    ACTUAL COST;    ADMINISTRATIVE COSTS;    AGRICULTURAL PRODUCTION;    ASSET MANAGEMENT;   

DOI  :  10.1596/1813-9450-5169
RP-ID  :  WPS5169

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Malawi has experienced severalcatastrophic droughts over the past few decades. The impactof these shocks has been far reaching, and the resultingmacroeconomic instability has been a major constraint togrowth and poverty reduction in Malawi. This paper describesa weather risk management tool that has been developed tohelp the government manage the financial impact ofdrought-related national maize production shortfalls. Theinstrument is an index-based weather derivative contractdesigned to transfer the financial risk of severe andcatastrophic national drought that adversely impacts thegovernment's budget to the international risk markets.Because rainfall and maize yields are highly correlated,changes in rainfall -- its timing, cumulative amount, anddistribution -- can act as an accurate proxy for maizelosses. An index has been constructed using rainfall datafrom 23 weather stations throughout Malawi and uses dailyrainfall as an input to predict maize yields and thereforeproduction throughout the country. The index picks up thewell documented historical drought events in 2005, 1995,1994, and 1992 and a weather derivative contract based onsuch an index would have triggered timely cash payouts tothe government in those years. This innovative riskmanagement instrument was pioneered in 2008/2009 by theGovernment of Malawi, with the assistance of the World Bank,and was a first for a sovereign entity in Africa. Severalpiloting seasons will be necessary to understand the scopeand limitations of such contracts, and their role in thegovernment's strategy, contingency planning, andoperational drought response framework.