Index based insurance (IBI) provides payments to policyholders based on the performance of an index, such as weather conditions, rather than individual losses. IBI can be used to cover costs from extreme events before actual losses occur. Pricing an IBI contract involves modeling the future behavior of the index using techniques like binomial models. IBI has potential to support GDP growth in Kenya by protecting farmers from risks like drought that account for a large share of Kenya's economy. The Insurance Regulatory Authority has provided draft guidelines to regulate IBI contracts.