This post introduces regional opportunities to scale out index-based livestock insurance (IBLI) in the Horn of Africa.
The Jameel Observatory for Food Security Early Action combines the local knowledge and concerns of communities facing on-the-ground threats of hunger with innovations in data science and humanitarian action; teaming up to devise solutions that can help predict, prepare for and overcome climate-related food security and nutrition challenges in dryland areas.
This post is one of a series illustrating expertise that partners bring to the Observatory. It introduces regional opportunities to scale out index-based livestock insurance (IBLI) in the Horn of Africa, drawing from the work of the International Livestock Research Institute (ILRI) and its partners.
Why livestock insurance for pastoralists?
While drought is not the only threat to pastoralists (the places they live can be conflict-prone and remote from public services for example), it can be mitigated through early warning prediction and forecasting, preparing well for risks, and targeted responses where they are most needed.
For 50 million pastoralists and agro-pastoralists in the Horn of Africa, livestock-rearing is the main source of livelihoods as well as meat and milk. When rains fail and drought hits, as it has for the past three years, these same livestock die, leaving their owners hungry and poor, and, in the longer term, struggling to rebuild their livelihoods. These droughts are increasing in frequency – according to Chris Funk of the Climate Hazards Center: “Before 1999, a drought – when there is poor or a failed rainy season – might happen once every five or six years. But since 1999, poor March to May rains are coming every two or three years.”
For livestock-owning pastoralists, these early actions include index-based livestock insurance (IBLI) that enhances their resilience to drought. IBLI sells insurance products to livestock owners. This pays out when a forage availability index derived from satellite observation falls below a pre-agreed threshold that indicates the incidence of drought conditions. The insurance payout is used by policyholders to purchase animal fodder or veterinary services that keep their animals alive.
Future IBLI perspectives for East Africa
After more than ten years work with various IBLI approaches in Kenya and Ethiopia, ILRI recently reviewed lessons from several IBLI-style initiatives operating at different levels. The aim was to guide investments as part of a wider approach to extend financial protection to pastoral communities in the region.
Overall, the study reported that these programs have been successful in helping insured pastoralists cope with the effects of drought shocks. They show that IBLI products do work. However, significant challenges to wider adoption and scaling were also encountered, including:
- The schemes at different macro- and micro- levels tend to operate independently. There are thus opportunities to better connect them to include more vulnerable communities in streamlined ways.
- The micro-level schemes selling directly to individual livestock owners struggle to be profitable. In particular, more cost-effective marketing, working with groups and cooperatives, and finding better ways of delivering cover are needed to reduce the costs of promotion, awareness and education, policy issuance, and premium collection.
- Insurance is just one way to build drought resilience and protect livelihoods and it needs to be delivered alongside other interventions that enhance risk assessment, risk reduction and preparedness building. To achieve complementarity and economies of scale, these insurance programs could also be embedded in wider disaster risk financing and drought resilience-building initiatives that target pastoralists.
- Insurance programs like these are more likely to succeed when implemented in locations where enabling factors like livestock input and output services are already more developed and pastoralists already have some financial awareness and lireracy.
These findings are now being assessed to determine optimum pathways to deliver livestock insurance products across the Horn of Africa. While there are still big questions and trade-offs to answer and assess, there is strong interest among the different countries for a coordinated regional approach that can insure around 50% of the total livestock population.
Contact Rupsha Banerjee
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