Disaster Insurance for Climate Loss and Damage: Assessing Challenges and Opportunities to Adoption in Malawi

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ABSTRACTDisaster insurance is gaining prominence as a tool to address climate‐induced loss and damage in developing countries. Despite ongoing efforts to pilot disaster insurance in Malawi, adoption by households remains low. This study examines factors influencing the adoption of disaster insurance in Malawi, a country highly susceptible to climate‐related impacts. Drawing on qualitative research across seven districts and guided by the Diffusion of Innovations Theory, the study identifies key opportunities and barriers to insurance uptake. It stresses the importance of awareness raising, integration with existing services, and partnerships in promoting insurance adoption. Additionally, the study explores novel approaches, including communities applying disaster insurance knowledge to design local risk pooling mechanisms, integrating insurance into existing projects, and designing hybrid indices for risk assessment and premium calculation. These offer insights into the potential synergies between formal insurance schemes and grassroots initiatives. However, challenges such as limited awareness, affordability constraints, absence of enabling policy and legal frameworks, and capacity gaps in the local insurance industry hinder widespread adoption. Addressing these barriers requires targeted interventions, including awareness campaigns, innovative financing mechanisms, and policy reforms. The study contributes to the debate on disaster insurance in low‐income countries, underscoring the need for reforms to build resilience.