NAIROBI, 29 January 2010 (IRIN) - Hundreds of pastoralists in northern Kenya will soon be better cushioned against the effects of recurrent drought thanks to a new index-based livestock insurance (IBLI) [http://www.ilri.org/research/Content.asp?CCID=41&SID)9] pilot programme in the upper eastern region of Marsabit. In the past 10 years, northern Kenya, where most people raise livestock for a living, has been hit by four severe droughts.
"The insurance will help pastoralists manage the tremendous challenges they face, particularly from livestock mortality due to weather-related shocks," Andrew Mude, an economist with the International Livestock Research Institute (ILRI), told IRIN. "Index-based insurance is good for dealing with risks caused by productivity failures and reductions due to lack of rainfall."
At the end of the two annual dry seasons, the IBLI scheme will pay out on the basis of predicted - rather than actual - livestock deaths, a percentage calculated, with help from the Arid Lands Resource Management Project, [http://www.aridland.go.ke/] by analysing satellite images of available pasture and forage.
Valuing the herd
The insurance premium will be 5.5 percent of the value of the herd covered in Upper Marsabit's Maikona and North Horr divisions, and 3.25 percent in Lower Marsabit's Central, Gadamoji, Laisamis, and Loyangalani divisions, as the risk is lower there.
For the purposes of the scheme, herd values are expressed in Tropical Livestock Units (TLUs), with a cow, or 10 goats, or 10 sheep worth one TLU, and a camel 1.4. For the year of the pilot scheme, a TLU is worth 15,000 Kenyan shillings, about US$25.
One advantage of this scheme is that claims do not need to be verified: once pasture and forage coverage falls to a point where at least 15 percent of livestock is predicted to die, payouts are automatic.
"It is unlike any other insurance programme. You don't have to present your livestock to be insured," said Umuro Roba Godana, executive director of the Pastoralists Integrated Support Programme (PISP), an NGO in Marsabit.
Godana said the use of forage availability to determine whether to compensate pastoralists was a fairer assessment than "relying on the declaration of a national disaster". Such disasters are often declared after livestock deaths have occurred.
"Personally, I am going to my hometown to tell people to get this insurance," added the Marsabit resident.
But he noted that the concept of insurance may be vague to some. "They cannot conceptualise it, insuring livestock is something new. Families with educated children may embrace this.
"The cost of the premium is reasonable compared to the loss from drought but the 15 [percent threshold] is a bit discouraging," Godana noted.
UAP Insurance Limited will provide the insurance services while Equity Bank Limited will directly engage the target client in the IBLI programme.
A partnership between the Dutch foreign ministry, Rabobank and EARS Earth Environment Monitoring [http://www.millenniumakkoorden.nl/agreements/00038-food-early-solutions-for-africa-fesa-micro-insurance] is also aiming to test drought insurance for crops through two pilots in Africa. They will rely on weather data, which will feed a crop growth model to generate crop yield estimates. Some 30 years of crop yield data will be used to assess the risk of crop failure and for developing and pricing a drought insurance product.
Reliance on traditional weather forecasters may also be a challenge, Godana said. "If they [the pastoralists] are told that will be plenty of rain in the next few seasons, why pay for the insurance then? At least when there is a drought they will understand the need [for the insurance]."
To avoid this, policies will only be sold until 28 February as the rainy season beginning in March may give the potential buyer information about the likely conditions of the season to come, unfairly affecting a purchase decision.
Laisamis resident Mohamed Kochalle told IRIN the premiums were expensive. "Many will miss the opportunity [as] our livestock are still too weak and we cannot sell them to access the service," he said.
Another Marsabit resident, Balesa Rage, said herders in remote parts of the region may not be aware of the scheme; in Samburu District south of Marsabit, resident Fabian Lolosoli called for the expansion of the IBLI to cover livestock losses due to disease and banditry.
Some Muslim scholars, such as Maalim Said and Ustad Yakub, were sceptical about the role of insurance, telling IRIN that recurrent droughts and flash floods were a punishment for engaging in sinful acts. The solution, they said, lay in repentance, the provision of alms and restraint from committing sin.