(Bloomberg) -- A drought driven by the El Nino weather pattern is likely to trigger insurance payouts to four southern African countries who took out cover with an agency of the African Union.
Malawi, Zambia, Zimbabwe and Mozambique will receive payments at the end of the harvesting season, according to current projections, African Risk Capacity said in a statement.
El Nino, which brings dry and hot weather to Southern Africa, has decimated harvests of corn across the region. Zimbabwe is expected to harvest about 60% less of the regional staple this year than it did in 2023 and together with Malawi and Zambia has declared a national state of disaster.
Still, the payments are unlikely to meet regional needs as disbursements to Malawi, Zambia and Zimbabwe in 2022 totaled $20.9 million. This year’s payments are yet to be disclosed.
The agency known as ARC uses a parametric insurance model, which triggers drought compensation payments according to the impact of timing, amount and distribution of rainfall. ARC also provides cover for cyclones and river floods.
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