In January 2010 the index-based livestock insurance (IBLI) pilot project was launched in Marsabit District of northern Kenya as an effort to help pastoralists manage drought risk, and its pernicious ex ante and ex post effects.
A Brief from the I4 Index Insurance Innovation Initiative reports results based on the impact of insurance on households’ anticipated changes in their coping behavior after receipt of their October 2011 IBLI insurance payouts. It gives a preliminary appraisal of the impact of drought insurance on household well-being.
The IBLI index insurance contract uses satellite-based measures of vegetative cover to predict average livestock mortality experienced by local communities. Households receive a payout if the predicted average livestock mortality rate reaches 15%. In October-November 2011 the first IBLI payouts were made to households who had purchased insurance earlier in the year. Households in our study received an average payout of about 10,000 Kenyan Shillings (or roughly $150).
The IBLI pilot was implemented in connection with a rigorous impact evaluation. This long-term research design will allow researchers to explore whether the beneficial effects of insurance (on both ex ante and ex post coping strategies) are large enough to warrant increased development of similar products. While we await those long-term findings, this Brief reports results based on the impact of insurance on households’ anticipated changes in their coping behavior after receipt of their October 2011 insurance payouts. By comparing these anticipated coping changes with those of their uninsured peers, we are able to arrive at a preliminary appraisal of the impact of drought insurance on household well-being.