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Implementing IBLI in Northern Kenya and investigating feasibility in Southern Ethiopia
 

Implementing IBLI in Northern Kenya and investigating feasibility in Southern Ethiopia

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Presented by Andrew G. Mude at the Workshop on Developing Index-Based Livestock Insurance to Reduce Vulnerability due to Drought-related Livestock Deaths, ILRI, Addis Ababa, Ethiopia, 12 July 2010.

Presented by Andrew G. Mude at the Workshop on Developing Index-Based Livestock Insurance to Reduce Vulnerability due to Drought-related Livestock Deaths, ILRI, Addis Ababa, Ethiopia, 12 July 2010.

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    Implementing IBLI in Northern Kenya and investigating feasibility in Southern Ethiopia Implementing IBLI in Northern Kenya and investigating feasibility in Southern Ethiopia Presentation Transcript

    • Implementing IBLI in Northern Kenya and Investigating Feasibility in Southern Ethiopia
      AndrewG. Mude (ILRI)
      Workshop on Developing Index-Based Livestock Insurance to Reduce Vulnerability due to Drought-related Livestock Deaths ILRI, Addis Ababa, Ethiopia 12 July 2010
    • Presentation Layout
      • Project Documentary: Describes and summarizes the suite of project activities.
      • Explanation of the key features of the Marsabit contract.
      • Brief Discussion about our proposal to adopt IBLI to Southern Ethiopia and how.
    • IBLI Marsabit: Contract Features
      • The Risk
      • Designed to provide compensation in the event of widespread drought –related livestock losses.
      • The Index
      • Predicted area-based livestock mortality
      • The Insurable Livestock Unit
      • Camel, Cattle, Sheep and Goat
      • Insurance provided on standardized Tropical Livestock Unit (TLU)
      • 1 Cattle = 1 TLU.
      • 1 Camel = 1.4 TLU.
      • 1 goat/sheep = 0.1 TLU.
      Example: To insure 4 cattle, 7 camel, and 12 goats/sheep,
      TLU insured is 4×1 + 7×1.4 + 12×0.1 = 15 TLU.
      • Value of the Insured Herd
      • 1 TLU = Ksh 15,000
      • To insure 15 TLU, insured value is thus: Ksh 225,000
    • IBLI Marsabit: Contract Features
      • Payout Structure
      • Payouts are made when predicted livestock mortality is above the “Trigger” index level. Trigger set at 15%
    • IBLI Marsabit: Contract Features
      Geographical Coverage
      - Two response function clusters ,
      Upper and Lower Marsabit
      - Index calculated at Division level.
    • IBLI Marsabit: Contract Features
      Temporal structure of IBLI contract
    • IBLI Marsabit: Contract Features
      • Contract Premiums
      • Premiums for contract with trigger level 15%, providing annual coverage with two potential payout periods
      • To insure 15TLU valued at Ksh 225,000
      • Upper Marsabit: Ksh 12, 375
      • Lower Marsabit: Ksh 7, 312.50
    • IBLI Contract Sales Figures for Jan/Feb 2010
    • IBLI for Southern Ethiopia
      • Proposal to Develop, Implement and Evaluate
      IBLI for Southern Ethiopia.
       To discover the viability and poverty reduction impacts of index-insurance and establish whether, how and when these impacts can be realized and sustained
    • IBLI for Southern Ethiopia
      Design a Livelihood Focused and Demand-Driven Product
      • Match product design to local risk experience by coupling statistical design work with preparatory design activities.
      • Exploit Current Data Sets
      • USAID Pastoral Risk Management Project (PARIMA)
      • 5 locations (Dida Hara, Dillo, Finchawa, Qorate and Wachille)
      • Quarterly from 2000 – 2002
      • Desta 17-year herd recall data (1980-1997)
      • Augment with Comprehensive Fieldwork
    • IBLI for Southern Ethiopia
      Investigate Alternative Contract Structures
      • Group-based Delivery or Provision
       Reduce cost of marketing, financial education and delivery
       Basis risk can be reduced by sharing
       Re-enforce existing risk management institutions
      • Ex-ante asset protection insurance
       Can we predict mortality sufficiently well in advance?
      • Linked credit and insurance
       Bundling IBLI with credit provision
       Loans for IBLI purchase
      • Climate change-sensitive contracts
       Incorporate climate change based predictions into IBLI modelling
       Conditional Insurance transfers
    • IBLI for Southern Ethiopia
      Investigate Alternative Contract Structures (Cont’d)
      • Risk layering
       Reducing risk coverage for commercial insurers for lower premiums
       Cap commercial provision of risk to an intermediate risk layer.
       Catastrophic zone can be explicitly taken up by government or donors who already offer some response in times of catastrophic loss
    • IBLI for Southern Ethiopia
      Develop Financial Educational Tools for Informed and Sustainable Demand
      • Educational games to educate and test demand
      • More cost effective extension system to reach scale
    • IBLI for Southern Ethiopia
      4. Impact Evaluation
      • Objective is to design and implement a product that sustainably improves welfare by managing drought-related mortality risk
      • Our impact evaluation strategy in Marsabit:
      • Baseline of 920 households with 3 annual repeats
      • Should allow us to rigorously establish impacts directly attributable to IBLI
      • Discount coupons and educational games to encourage uptake
      • Also plan for qualitative surveys to generally establish perspective of target clientele.
    • IBLI for Southern Ethiopia
      5. Partners for Progress
      • The research, development, implementation effort requires effective collaboration across a range of dedicated partners
      • Our Marsabit Partners included:
      • Technical Partners (ILRI, Cornell, BASIS CRSP, University of Syracuse)
      • Commercial Partners (Equity Insurance Agency, UAP Insurance Co., Swiss Re)
      • Development Partners (Financial Sector Deepening Trust, Food for the Hungry, Hunger Safety Net Program…)
      • Government of Kenya (Arid Land Resource Management Program)
      • Donors (DfiD, USAID, World Bank, ILO-MIF, GIIF)
    • Feasibility of IBLI in Southern Ethiopia I-Four
      • Economics and social values of IBLI in Ethiopia under I-4
    • Thank you
      For more information please visit:
      www.ilri.org/ibli/