Index-based livestock insurance pays out against established losses and relies on satellite-based indicators. ©FAO/Tony Karumba

10 July 2019, Addis Ababa - The Livestock sector contributes up to about 54% of national GDP in some countries of the IGAD region. However, pastoralists are affected by climate change posing fatal threats to livestock and their livelihood, with loss and mitigation cost estimated by 2 % for these countries.

In efforts to support countries to withstand these negative impacts on their economies - the International Livestock Research Institute (ILRI), World Bank, Technical Centre for Agricultural and Rural Cooperation (CTA), Food and Agriculture Organization of the United Nations (FAO), and the Intergovernmental Authority on Development (IGAD) held a joint ministerial policy dialogue on Index-Based Livestock Insurance from 24-26 June 2019.

In remarks made at the event, Chimimba David Phiri, FAO Subregional Coordinator for Eastern Africa noted the vital contribution of the livestock sector to the region’s food and nutrition security. He further added that IGAD countries should develop a common approach to benefit economies of scale, benefit from spillover from countries. “Index-based livestock insurance is an important financial instrument to mitigate the risk of climate shocks faced by livestock owners,” Phiri said

On his part, Jimmy Smith Director of International Livestock Institute (ILRI) said many livestock supported livelihoods in the region are at risk due to increased climatic shocks and joint action is required to help build resilience through market-based solutions.

In the official opening speech, Gebregziyaber Gebreyohannes State Minister for Livestock and Fisheries in Ethiopia noted that the livestock sector is a main economic driver with increasing demand in his country. It can benefit from the index-based insurance system to protect against losses and withstand climate shocks.

A Ministerial panel discussed disaster risk management and index-based insurance principles and tools.  It also explored good practices and positive examples in the implementation of drought risk management strategies that utilize multiple financing instruments. The high-level panel led by delegates from eight IGAD countries explored solutions to tackle climate shocks facing agricultural producers and shared experiences on the management of the livestock sector.

Index-Based Insurance, the way forward

Discussions were held on the underestimated value of the livestock sector despite its role in food and nutrition security, on disaster risk management, and the significant costs of drought emergency interventions. 

Index-based livestock insurance pays out against established losses and relies on satellite-based indicators. It aims to trigger timely indemnity payouts to insured pastoralists and agro-pastoralists before droughts hit enabling farmers to buy fodder, food, water, vaccines to keep their livestock alive until Trade and, climate conditions get better.

Lessons learned from index-based insurance pilot countries: - Kenya and Ethiopia indicate positive impacts on household welfare and ability to cope with drought. The workshop emphasized the role of public-private-partnership approach, and the advantages of long-term financial sustainability of country-level insurance programmes to benefit from a regional initiative to promote best practices. 

The workshop concluded with key recommendations, such as amplifying the index-based livestock insurance throughout the IGAD region in order to help build the resilience of farmers. The participants also called for stronger collaboration between development partners across the IGAD region in order to build the resilience of communities through pre-arranged finance schemes.