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Index insurance for agriculture in Ethiopia <br />Addis Ababa, Ethiopia,  9 December 2010<br />Design and Development of I...
  Outline       Developing IBLI Ethiopia Research Agenda<br /><ul><li>Objective</li></ul>To discover the viability and pov...
Design a livelihood-focused IBLI
Identify suitable contract structure
Identify suitable delivery mechanisms
Address impacts of climate change and induce climate change adaptation</li></li></ul><li> Existing Data                   ...
Quarterly household survey (30 hhs/kebele)
5 kebeles in 4 woredas
Desta (1999)’s Herd Recalls Data (1981-97)
Annual household herd recalls (~15 hhs/center)
35-km radius of 4 town centers</li></ul>Note on Studied Sites: <br />PARIMA’s Kebele<br />Desta’s Town Center<br />YEBELO<...
 Existing Data                   Longitudinal household data<br /><ul><li>Livestock Mortality rate (%)</li></ul>PARIMA (20...
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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

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Transcript of "Design and development of IBLI for southern Ethiopia"

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