Ongoing drought in Horn may trigger first-ever insurance payments to remote African livestock herders

ILRI researcher with local people in Marsabit, Kenya

ILRI researcher holds discussions with local pastoral herders in Marsabit, in Kenya’s northern drylands, for ILRI’s Index-based Livestock Insurance project (photo credit: ILRI/Mude).

SciDevNet reports that, due to the great drought engulfing the Horn of Africa, an ‘index-based’ livestock insurance scheme for herders in Kenya’s remote Marsabit District may make payments to those who had earlier purchased the insurance. This is the first time insurance has ever been offered Kenya’s remote livestock herders, and these would be the first payments for those who have insured their stock.

What is ‘index-based’ livestock insurance?
Index-based livestock insurance makes the risk-management benefits of insurance available to poor and remote clients. The product being piloted in Marsabit District by the International Livestock Research Institute (ILRI) and other partners, including the private sector, aims to provide compensation to insured pastoralists in the event of livestock losses due to severe forage scarcity. Incorporating remotely-sensed vegetation data in its design, delivered via mobile ICT-based transactions platforms, and with experimental extension methods used to educate the remote pastoral herders, this insurance product boasts many firsts in product development. Payments are triggered when severe drought makes forage scarce over a long period and when it can be predicted from that that more than 15 per cent of livestock in the area will have died of starvation.

SciDevNet reports the following.
‘Insurers will assess in October whether Kenyan farmers signed up to the Index-Based Livestock Insurance scheme will receive their first payment, after the worst drought in the region for 60 years.

‘The scheme, which has been piloted in northern Kenya since early 2010, uses freely-available satellite data to assess the state of pastures. When the images show that pastures have dried up, farmers can claim compensation for animals that have died as a result—without insurers having to verify the deaths in person.

‘In Kenya about 2,500 farmers have purchased the product since its inception, paying a yearly premium of up to US$100 for 6–8 animals. . . .

‘”So far, the predicted mortality [rate is] high—but we have to wait for the final tally at the end of October in order to determine whether or not there will be a payout,” said Brenda Wandera, project development manager at the International Livestock Research Institute (ILRI), Kenya, which implemented the scheme.

‘The scheme will be extended to southern Ethiopia in February 2012 to help mitigate the effects of drought. It will initially target 2,700 pastoralists.

The aim is to find a viable insurance tool that could cushion pastoralists from heavy losses experienced during droughts, according to Wandera.’

‘ILRI will partner with the Nyala Insurance s.c. company in Ethiopia, with support from the International Food Policy Research Institute, the US international development agency USAID and the World Bank. . . .’

The technical partners in this project
Cornell University
Index Insurance Innovation Initiative
Syracuse University (Maxwell School)
University of Wisconsin (BASIS Research Program)

The implementing partners
Equity Insurance Agency
UAP Insurance Limited
Financial Sector Deepening (FSD) Kenya
Kenya Meteorological Department
Kenya Ministry of Development of Northen Kenya and other Arid Lands
Kenya Ministry of Livestock

The donor agencies
UK Department for International Development (DFID)
United States Agency for International Development (USAID)
World Bank

Read the whole article at SciDevNet: Kenyan farmers may soon receive first drought payout, 15 Aug 2011.

For more information, visit the blog of ILRI’s Index-Based Livestock Insurance project.

Index-based livestock insurance project in northern Kenya wins best practice award

Andrew Mude of ILRI receives IBLI award

Andrew Mude of ILRI receives the best-practice award for the Index-based Livestock Insurance project from Manfred Wiebelt, the director of PEGnet (Photo: PEGnet) 

The International Livestock Research Institute (ILRI) led Index-based Livestock Insurance (IBLI) project in northern Kenya, which provides livestock insurance to over 2000 households in Marsabit district to help livestock herders sustain their livestock-dependent livelihoods during drought, has received a best-practice award from the Poverty Reduction, Equity and Growth Network in recognition of the project’s innovative approach of combining scientific research and practice.

The award was presented to Andrew Mude, an economist with ILRI, who also heads the Index-based Livestock Insurance project, during the Poverty Reduction, Equity and Growth Network’s conference ‘Policies to Foster and Sustain Equitable Development in Times of Crises’ held in Midrand, South Africa, on 2-3 September 2010.

Over the past two years, ILRI in collaboration with partners from Cornell University, the BASIS I4 project at the University of California – Davis, and Syracuse University, have come up with a research program that has designed and developed the insurance program. It is now being implemented by commercial partners as a market-led index-based insurance product that is protecting livestock keepers from drought-related animal losses particularly in the drought-prone arid and semi arid areas of Kenya. The program uses satellite imagery to determine and predict potential losses of livestock forage and issue insurance payouts to participating members when incidences of drought occur.

The first pilot product of this project, launched in January 2010 in Marsabit, brings together Equity Bank of Kenya, UAP Insurance and Swiss-Re as commercial partners who are running a commercially viable insurance product. This is a first-of-its-kind initiative in Africa and it holds enormous potential for benefitting livestock keepers in the region and across the continent. So far, the project has recorded over 2000 contracts covering livestock worth over US$1 million and attracting premiums of over US$77,000.

The project is expected to bring economic and social benefits to livestock keepers and protect households against drought-induced livestock losses thereby reducing their likelihood of descending into poverty. By insuring the assets of pastoralists against catastrophic losses, members will be able to come out of poverty, be protected from the risk of falling into poverty and at the same time will have opportunity to explore other activities for household economic development.

The impact of the project is currently under assessment to find out its benefits before it can be scaled up to other districts in the country. 

The Poverty Reduction, Equity and Growth Network brings together researchers with an interest in issues revolving around poverty, inequality and growth in developing countries and links them to German development policy bodies with the aim of among others, using research results for policy advice on pro-poor growth strategies.

More information about the Index-based Livestock Insurance project can be found on the project website:

The following ILRI news article shares information about the project’s launch in Marsabit:

To find out more about the Poverty Reduction, Equity, and Growth Network’s 2010 conference please visit

ILRI, Equity Bank and UAP Insurance launch first-ever project to insure cows, camels and goats in Kenya’s arid north

Satellite images of remote African lands are used to insure herders from devastating droughts

Arid lands

Thousands of herders in arid areas of northern Kenya will be able to purchase insurance policies for their livestock, based on a first-of-its-kind program in Africa that uses satellite images of grass and other vegetation that indicate whether drought will put their camels, cows, goats and sheep at risk of starvation.

The project was announced today in northern Kenya’s arid Marsabit District by the Nairobi-based International Livestock Research Institute (ILRI), microfinance pioneer Equity Bank and African insurance provider UAP Insurance Ltd.

The index-based livestock insurance program will use satellite imagery to determine potential losses of livestock forage and issue payouts to participating herders when incidences of drought are expected to occur. If successful in the Marsabit District—where few of the 86,000 cattle and two million sheep and goat populations, valued at $67 million for milk and other products, are rarely slaughtered—the program would be offered to millions of semi-nomadic pastoralists and livestock keepers in other parts of the east African region.

“Today, our agents will begin selling insurance policies backed by UAP that for the first time will provide pastoral families in Kenya’s remote Marsabit District with a simple way to reduce their drought risk —the biggest threat to their cherished herds of cattle, sheep, goats, and camels—from devastating lives and livelihoods,” said Equity Bank Managing Director James Mwangi. “Livestock is the key asset for families in this region and securing this asset is critical to their ability to obtain credit and investments that can allow them to grow and prosper.”

ILRI, which is part of the Consultative Group on International Agricultural Research (CGIAR), developed the project with partners at the Ministry of Development of Northern Kenya, Cornell University, Syracuse University, the BASIS program at University of Wisconsin, and the Index Insurance Innovation Initiative. The project is funded by UK’s Department for International Development (DFID), United States Agency for International Development (USAID), the World Bank and Financial Sector Deepening Trust (FSD Kenya).

Insuring livestock of pastoral families has long had been considered impossible due to the formidable challenges of verifying deaths of animals that regularly are moved over vast tracts of land in search of food. ILRI and its partners have overcome this impediment by combining satellite images of vegetation in the Marsabit District with monthly surveys of livestock deaths to pinpoint the level of forage reduction that will cause animals to die. This program is different from all others because it does not pay clients based on the actual loss of their livestock assets, but rather on indicators that the animals are at risk of death.

“The reason this system can work is that getting compensation does not require verifying that an animal is actually dead,” said Andrew Mude, who is the project leader at ILRI. “Payments kick in when the satellite images, which are available practically in real time, show us that forage has become so scarce that animals are likely to perish.”

Droughts are frequent in the region—there have been 28 in the last 100 years and four in the past decade alone—and the losses they inflict on herders can quickly push pastoralist families into poverty. For example, the drought of 2000 was blamed for major animal losses in the district.

“Insurance is something of the Holy Grail for those of us who work with African livestock, particularly for pastoralists who could use insurance both as a hedge against drought—a threat that will become more common in some regions as the climate changes—and to increase their earning potential,” said ILRI Director General Carlos Seré.

The cost of the plans offered will vary depending on the number of animals and the area of coverage. The policies contain a clause akin to a deductible, in which a family would buy coverage that would pay-out when livestock losses are expected to exceed a certain level. “We believe this program has potential because it has the elements insurers need to operate, which is a well-known risk (drought), and an external indicator that is verifiable and can’t be manipulated, which in this case is satellite images of the vegetation,” said James Wambugu, Managing Director of UAP Insurance.

The data on forage availability are derived from satellite images of plant growth in the region that are part of a global survey known as the Normalized Difference Vegetation Index, or NDVI, a database regularly updated by scientists at the US National Oceanic and Atmospheric Administration (NOAA) and the US National Aeronautics and Space Administration (NASA). To develop the livestock insurance program, ILRI used NDVI data collected since 1981 estimating forage availability vegetation in the Marsabit District. This information was combined with data on livestock deaths that have been collected monthly since 2000 by the Kenya Arid Lands Resource Management Project (ALRMP) and USAID’s Pastoral Risk Management Project. The result is a statistical model that reliably predicts when and to what degree forage reductions will result in drought-related livestock deaths.

Given the complexity of index-based livestock insurance, ILRI and its partners have developed an insurance simulation game for local communities to explain the key features of the insurance policy and tested it across the Marsabit District. ILRI’s Mude said many of the herders who played the game became intensely involved in the simulation. “It helps them understand how insurance can protect them against losses. They also appear to simply enjoy playing the game itself, which generates a lot of animated discussion,” said Mude.

Mude said there is a potential for livestock insurance to be valuable even without a drought that triggers payments. For example, a policy could prevent stock losses by providing pastoralists the means to obtain credit for purchasing feed and drugs that would allow animals to survive the tough conditions. Similarly, pastoralists who want to expand their herds to take advantage of Africa’s rising demand for livestock products are likely to find it easier to obtain capital from private creditors now unwilling to lend due to the risks associated with droughts.

But more fundamentally, ILRI believes insurance can help avert an all too common catastrophe, and one that could occur with more regularity if climate change alters rainfall patterns in the region: droughts pushing pastoralist families into chronic impoverishment by inflicting losses from which the people cannot recover.

For further background information on project details visit the IBLI website and associates ILRI stories