Index-Based Livestock Insurance in Kenya (IBLI)
Insurance for pastoralist herders in northern Kenya that pays on a satellite-estimated livestock mortality index, without adjusting dead animals herd by herd.
Traditional livestock insurance requires an adjuster to verify each dead animal, which is impossible among nomadic herders spread across hundreds of miles of arid land. IBLI replaces that verification with an index: the condition of vegetation, measured by satellite, is used to predict average livestock mortality in a zone, and every insured herder in the zone is paid when predicted mortality crosses a threshold. Administrative costs fall, fraud disappears, and payment can arrive before herds are wiped out. In exchange, the herder bears basis risk: his herd can suffer while his zone's index stays below the threshold, or the reverse. The scheme shows how a climate risk can be underwritten where indemnity insurance has never been able to take hold.
Launched in 2010 in Marsabit District, northern Kenya, by the International Livestock Research Institute (ILRI) with Cornell University and the University of California, Davis, the scheme made its first payouts in October 2011, in the middle of a drought, to 650 herders: according to ILRI, the first index-based livestock insurance payments ever made on the African continent.
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