Examining the long term impacts of catastrophic drought insurance

by | Nov 4, 2024 | Drought, Drylands, Early Action, Eastern Africa, Ethiopia, Evidence, Horn of Africa, Kenya, Livestock, Pastoralism, Rangelands, Research | ,

As part of a research project to estimate the impacts of insurance in the longer term, Jameel Observatory Research Lead, Nathan Jensen, recently attended the International Conference on Inclusive Insurance where he presented research examining the long term impacts of catastrophic drought insurance on pastoral households in Kenya and Ethiopia.

This research used randomized premium discounts to identify the causal impacts of insurance purchases between 2010 and 2015 on outcomes measured in the 2020s.  It finds that insurance coverage caused a shift in household livestock portfolios away from small stock towards larger animals that are less liquid but also more profitable.  Interestingly, this shift also had the added effect of freeing up children from herding obligations and increasing the likelihood that they attended school.  While no impacts were found on income or herd value, the research indicates that insurance can relax risk constraints on household production strategies and investments in education.

The presentation was as part of the academic track of the conference, which was hosted by the Center for Economic Analysis of Risk (CEAR) at Georgia State University and  Utrecht University. The track also included presentations by Michael Mbaka (ZEP-RE) on the de-risking, inclusion and value enhancement of pastoral economies in the horn of Africa (DRIVE) program, by Lotte van der Haar (Wageningen University) on the impact of providing information about consumer value and contract performance of insurance, and by Anouk van Veldhoven (Utrecht University) on the impacts of targeting information about the DRIVE financial product at men or women in the household.

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Download the presentation by Nathan Jensen

Download the full paper: Long-run Effects of Catastrophic Drought Insurance

Download the presentation on DRIVE by Michael Mbaka