Andrew Mude (right), a scientist at the International Livestock Research Institute (ILRI), in Nairobi, Kenya, explains the livestock insurance payouts made last week to resource-poor livestock herders in Kenya’s Marsabit District in the wake of a great drought in the Horn of Africa that dried up the available forage on Marsabit’s rangelands and caused the death of about a third of the stock that are maintained on those lands by pastoral herders (all photos in this post on Flickr by Neil Palmer/CIAT).

Germany’s international broadcaster Deutsche Welle interview Andrew Mude, a scientist at the International Livestock Research Institute (ILRI), last week on a novel ‘index-based’ insurance product Mude’s international research group has launched in the northern drylands of Kenya, in East Africa.

‘In Kenya’s Marsabit District, up to one-third of the cattle die due to drought. But hundreds of herders now benefit from an innovative livestock insurance scheme, set up by the International Livestock Research Institute (ILRI) in Kenya. Payouts are triggered if satellite images predict that herders will lose more than 15 percent of their cattle, as the head of ILRI’s livestock insurance scheme, Andrew Mude, explains.

Deutsche Welle: Why is it that ‘insurance is not paid out when an animal dies, but based on satellite pictures determining how good or bad a grazing area is?
ILRI’s Andrew Mude: ‘This is an innovation in insurance, which allows the risk management benefits of insurance to really come to bear to a very remote population, and for small insurance amounts. One reason it would be difficult for traditional insurance to serve this population, is that when you have losses, you need to verify them. This area is quite far from the main towns where you have insurance agents and so on, and for an agent to have to travel all the way to this area just to verify whether a particular farmer has lost two animals—valued at about $300—is too cost-inefficient. This model allows for us to ascertain what the livestock condition in the area is, without actually having to go to that area.

‘So, you hope that in the future, via mobile phone technology, the banking—the payout and the sales—could be done completely via cell phone networks?
Yes, certainly. Most of the sales are already being done via telephone-based platforms and other points of sale, so once the capacities extend to the whole area, then I think it would be possible. This would really bring down the costs of implementation, and therefore also bring down the price of the product itself: the premiums.

‘What scope do you see for this insurance in the area, and also maybe in other countries?
‘We think there’s scope for scaling up, but only for pastoral production systems … But there are many areas across northern Kenya, in Ethiopia—we’ve started out a project in Uganda, and we’re also thinking of moving this to areas in West Africa, where the pastoral system is a big part of livestock production. And there also are areas in Southeast Asia where such conditions hold true. Over the next three or four years, our main aim is basically to expand the product, and continue to learn. And once we have learned lessons of where this product is best suited, we’ll be able to write a process manual that can be used by various commercial entities, even other partners who are interested in implementing this program in different places.’

Read the whole interview by Anke Rasper for Deutsche Welle: African livestock insurance scheme pays out first claims, 28 Oct 2011.

Read more on this topic in ILRI’s News Blog:

Livestock director and partners launch first-ever index-based livestock insurance payments in Africa, 25 Oct 2011.

Herders in drought-stricken northern Kenya get first livestock insurance payments, 21 Oct 2011.