Pastoralists in Marsabit who have lost up to a third of their animals due to ravaging drought witnessed in the country a few months ago today received compensation from UAP Insurance under an insurance program developed in partnership with the Nairobi-based International Livestock Research Institute (ILRI), Cornell University, Equity Bank and the index Insurance Innovation Initiative (14) program at the University of California at Davis.

Some 650 insured herders in northern Kenya’s vast Marsabit District benefited from this innovative programme that promises to change the fate of pastoralists living in the arid and semi-arid areas and who face periodic lose of their herds due to drought. “It’s terrible that we are seeing this level of loss but gratifying that the policies are doing what they are supposed to do, which is to help herders avert disaster when weather conditions dry up pasture lands and animals begin to perish,” said Isaac Magina, Head of Agriculture Insurance, UAP Insurance.

Known as Index Based Livestock Insurance or ILBI, payouts are triggered when satellite images show that grazing lands in the region have deteriorated to the point that herders are expected to be losing greater than 15 percent of their herd. The current readings upon which indemnities are now being paid show that between 18 to 33 percent of livestock have been lost to drought this season.

“The payments we are issuing today can at least cushion the blow from the drought and, in the areas suffering the most, they should provide enough money to help policy holders purchase replacement animals,” said Equity Bank Chief Executive Officer James Mwangi. Marsabit District is home to some 86,000 cattle and two million goats and sheep who generate $67 million in milk and other products and serve as the main source of sustenance and income for millions of semi-nomadic pastoralists and other livestock keepers. Under the terms of the policy, insured herders are compensated for any losses above 15 percent, with the 15 percent threshold acting as a sort of deductible.

For example, a cattle herder who lives in an area with livestock mortality rate of 33 percent received a payout covering 18 percent of his or an insurance policy covering ten animals or Ksh 150,000 in cattle would payout about Ksh 27,000 (about US $270). When the 15 percent deductible is factored in, compensation is ranging from three percent in areas where the drought has been more moderate to 18 percent in the areas where the herders were hit particularly hard.

But in an indication of the severity of the drought, all the areas where the policies were sold have exceeded the 15 percent mortality threshold that triggers a payout. Thus far, the policies cover about 1100 animals, mostly cattle but some goats and sheep and a few camel as well. The Payments are being dispatched in the middle of a humanitarian crisis endangering 12 million people in the Horne that is promoting a call for new ways to manage food security risks in East Africa’s arid drylands.

For example, report from ILRI has found that the pastoral approach to livestock production, in which herder’s make-do with marginal lands by regularly moving their herds, could be very effective at averting weather-related food shortages. ILRI experts believe that in arid and semi-arid regions, keeping livestock could be a more effective coping strategy than cultivating crops- if herders have options for reducing their vulnerability.

“Drought insurance is one important way to help livestock keepers maintain food security even in very harsh environments,” said Andrew Mude, the IBLI project leader ILRI. Mude continued: “Insurance is not by itself sufficient, but if it is accompanied by other risk-reducing strategies, such as better access to grazing lands and watering areas, then the pastoralist approach, which some people dismiss as a backward lifestyle of the past, emerges as a very effective way to meet the future food needs.”

Mude, however, noted that it is too early to tell just how they payouts from the policies will affect food security and other welfare indicators. For example, it’s not yet clear how many herders will use the compensation to replace animals lost to the drought. “One of the major successes thus far is that the livestock mortality index that is at the heart of the program appears to be working.

The fatality rate predicted by the satellite assessments of forage loss is tracking very closely to surveys of animal deaths on the ground. This is crucial because using freely available satellite images of pasture lands to accurately predict animal deaths overcomes a major barrier that has bedeviled past efforts to provide livestock insurance in poor regions,” explained Mude.

The IBLI project is funded by UK’s Department for International Development (DFID), the European Union, the Global Index Insurance Facility, the Micro insurance Facility of the International Labor Organization (ILO), the Unites States Agency for International Development (USAID) and the World Bank. Going forward, experts believe a key issue will be whether livestock insurance in East Africa would be commercially viable itself or whether its ability to protect herders from the impact of prolonged drought might justify some level of financial support from governments or donors, as agricultural insurance programs in Western countries often do.

“This is asset insurance for animals that are the centerpiece of livelihoods, providing a stream of income and nutrition for years and years. The investment in insurance based asset safety nets protecting these herds could have a more cost-effective welfare impact over the longer term forms such as food and cash assistance,” concludes Mude.