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Design and development of IBLI for southern Ethiopia

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Presentation by Andrew G. Mude at the Index Insurance for Agriculture in Ethiopia Workshop, Addis Ababa, Ethiopia, 9 December 2010

Presentation by Andrew G. Mude at the Index Insurance for Agriculture in Ethiopia Workshop, Addis Ababa, Ethiopia, 9 December 2010

Published in: Technology

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  • 1. Index insurance for agriculture in Ethiopia
    Addis Ababa, Ethiopia, 9 December 2010
    Design and Development of IBLI for Southern Ethiopia
    Andrew G. Mude
    International Livestock Research Institute
  • 2. Outline Developing IBLI Ethiopia Research Agenda
    • Objective
    To discover the viability and poverty reduction impacts of index-insurance and establish whether, how and when these impacts can be realized and sustained
    • Key Steps
    • 3. Design a livelihood-focused IBLI
    • 4. Identify suitable contract structure
    • 5. Identify suitable delivery mechanisms
    • 6. Address impacts of climate change and induce climate change adaptation
  • Existing Data Longitudinal household data
    GELANA
    ABAYA
    BORE
    URAGA
    ADOLANA
    WADERA
    ODO
    SHAKISO
    HAGERE MARYAM
    Negele
    Finchawa
    Qorate
    LIBEN
    Yabelo
    Arero
    TELTELE
    ARERO
    Dillo
    MOYALE
    DIRE
    Moyale
    Borana and Guji Zones
    • PARIMA (2000-02)
    • 7. Quarterly household survey (30 hhs/kebele)
    • 8. 5 kebeles in 4 woredas
    • 9. Desta (1999)’s Herd Recalls Data (1981-97)
    • 10. Annual household herd recalls (~15 hhs/center)
    • 11. 35-km radius of 4 town centers
    Note on Studied Sites:
    PARIMA’s Kebele
    Desta’s Town Center
    YEBELO
    Dida Hara
    Wachille
    Mega
    KENYA
    KENYA
  • 12. Existing Data Longitudinal household data
    • Livestock Mortality rate (%)
    PARIMA (2000-02)
  • 13. Existing Data NDVI and Livestock Mortality
    Satellite imagery NDVI (8km resolution, available every 10 days in real-time)
    Drought 2000 Drought 2009 Good forage condition 2010
    Standardized NDVI
    Drought 84-85 Drought 90-91 Drought 99-00 Drought 05-06 Drought 09
    Key Questions:
    Other longitude household-level data? Verification of past data?
    The need to collect recent herd recalls?
    Area livestock loss (%) (Recalls from Desta 1981-97, PARIMA 1998-2002)
  • 14. Scoping Mission (2010)
    • Objectives
    To introduce IBLI to local communities/authorities
    FGD to learn the local opinions on IBLI
    To meet with local authorities, financial institutions, NGOs
    • Key discussions
    Contract design
    (Group-based, ex-ante payout)
    Delivery mechanism
    Climate change
  • 15. Contract design/delivery/regulation Group-based IBLI
    Financial Institution
    Financial Institution
    Financial Institution
    i
    i
    i
    i
    i
    i
    i
    i
    i
    G
    G
    Individual IBLI Group as delivery channel Group as client
    + Substitute for absence financial facilities in remote locations
    + Use group learning to enhance education and extension
    + Use group rules to reduce individual basis risks
    + Enhance prospect for linking credit access with insurance
    -- Groups need to be well-established, participated by pastoralists
  • 16. Contract design/regulatory Ex ante/ Ex post payout
    Observed loss
    Start of the contract
    Ex-ante payout
    for asset protection
    Ex-post payout
    for asset replacement
    IBLI payment to insured to protect animals before drought
    + Could be cheaper to protect animals than to replace them
    • Rely on accuracy in predicting livestock mortality ex-ante
    Potential use:
    • Supplementary feed and water
    • 17. Hired transport to access market
    IBLI payment to insured to replace animals after drought
    + Higher accuracy in predicting livestock mortality
    • May be more expensive to replace animals
    Key Questions:
    Which product could provide more effective risk management?
    What are regulatory pre-requisites of ex-ante product?
  • 18. Contract design/regulatory 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
  • 19. Climate change adaptation/mitigation
    • Climate change  more/worse droughts  IBLI more expensive … mitigation to limit premium rise, adaptation to cushion against premium rise?
    • 20. Evidence of change in NDVI
     Climate change?
    • Incorporating Climate Change in IBLI modeling and delivery:
    • 21. Feeding climate change predictions into IBLI response functions and pricing in expected climate change
    • 22. Conditional Insurance Transfers
  • Impact Evaluation
    • Follow a similar impact evaluation strategy as in Marsabit:
    • 23. Baseline of 920 households with 3 annual repeats
    • 24. Should allow us to rigorously establish impacts directly attributable to IBLI
    • 25. Discount coupons and educational games to encourage uptake
    • 26. Also plan for qualitative surveys to generally establish perspective of target clientele.
  • Thank you
    For more information please visit:
    www.ilri.org/ibli/

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