What You need to know about INDEX BASED LIVESTOCK INSURANCE

1. What You need to know about INDEX BASED LIVESTOCK INSURANCE Index Based Livestock insurance (IBLI) Index Based Livestock Insurance Geographical Coverage • IBLI is a product that is designed to protect against drought-related livestock mortality due to lack of forage within a geographically defined space. • This Insurance is based on the established statistical relationship between area-average livestock mortality and forage availability. • The insured pastoralists will receive payouts when the predicted mortality exceeds a certain level which is referred to as the trigger level. The trigger level for Marsabit region is 15%. • The contract will cover the pastoralists in the larger Marsabit District which will be covered by two separate contracts. We have the Upper Marsabit contract covering Maikona and North Horr divisions, and the Lower Marsabit contract covering Central and Gadamoji, Laisamis, and Loiyangalani divisions. • Payouts will however be done per division as forage availability will be monitored per division. • This is an annual cover that runs from 1st March to the 28th of February the next year or from 1st October to 30th September of the nest year. The selling window for this annual cover runs from 1st January to 28th February or 1st August to 30th September . • For this Insurance the livestock values will be expressed in terms of Tropical Livestock Units TLU. • 1 Cow = 1 TLU 1 Camel = 1.4 TLU 1 Goat/ Sheep = 0.1 TLU • Using average prices for livestock across Marsabit the set price per TLU insured is Kshs. 15,000. • The value can be converted to 1 camel (1.4 x 15,000= Kshs 21,000) I Cattle (1 x 15,000= Kshs 15,000) I Goat (0.1 x 15,000= Kshs 1,500) I Sheep (0.1 x 15,000= Kshs 1,500) • Premiums in Upper Marsabit (5.5% of the value of livestock to be insured) are higher than those in Lower Marsabit (3.25%) because the risk of livestock mortality is higher. As the risk is higher, the cost of protection must also be higher. Temporal Structure of Index Based Livestock Insurance contracts Key benefits of Index Based Livestock Insurance • The trigger cannot be manipulated by individual pastoralists or by the insurance company because the vegetation cover change that determines the trigger is easy to observe. • Payouts are calculated automatically when the trigger is activated – there are no claims to file. • Payouts will provide compensation when insured losses occur. • Financial institutions are likely be more willing to offer credit/loan with livestock as collateral because with Drought Insurance the risk of livestock loss is diminished. Example: Premium costs in the different clusters IndexBased Livestock Insurance partners APA Insurance Company– offer IBLI cover in Marsabit, regulatory approvals and negotiate reinsurance. ILRI – along with research partners develop concept, design product and provide technical backstopping for implementation, support capacity building and conduct impact assessment. Develop partnership and work with partners to achieve objectives. Liaise with other stakeholders. Example: How payouts are made Since the trigger level is 15% then if; Where you can buy THIS PRODUCT? Index Based Livestock Insurance can be bought from the Insurance companies or their appointed agents. You can also contact your chief and the Village Insurance Promoters for more information on where to purchase.