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Index Based Livestock Insurance
Index Based Livestock Insurance (IBLI) is an insurance product aimed at protecting pastoralists in northern Kenya and southern Ethiopia from shocks associated with livestock mortality due to drought. IBLI began as a pilot project in Marsabit, Kenya but has since expanded into other regions of northern Kenya and the Borana region of southern Ethiopia. Although the polices vary by region, they are all based on an index of the remotely sensed Normalized Difference Vegetation Index (NDVI) as an indication of rangeland conditions and available forage. In each index region, historic NDVI data were used to standardize NDVI values so that seasonal observations can be examined relative the normal distribution. Indemnity payments are made equally to all policy holders within an index region after seasons in which conditions are such that the NDVI values reflect drought conditions.

Index Insurance
Basing insurance on an index, rather that individual level losses, can reduce the costs of insurance provision significantly, allowing for availability in regions that have until recently had little or no access to insurance. But, because indemnity payments are made according to a shared index value, index insurance products can only cover covariate risk, leaving policies holders with idiosyncratic risk. Thus index insurance products are only appropriate in environments and at scales in which much of the risk that policy holders are exposed to is covariate. For that reason, most of the index insurance products available are for weather related risk for agriculturalists.

IBLI Contracts
The IBLI products were developed by a team of collaborators at Cornell University and the International Livestock Research Institute (ILRI) but are sold to pastoralists by private enterprises. There are a number of different IBLI contracts due to variation in data availability and an evolution of the product. The first IBLI contracts were sold in Marsabit, Kenya in January 2010. Since then, variations on that contract have been sold in the Borana region of southern Ethiopia, XXXXXXX

Insurance policies are sold during sales windows in denominations of tropical livestock units (TLU). TLUs are means for aggregating or comparing different animal species according to the metabolic weight and are calculated as follows: camel=1, cattle=0.7, shoat=0.1.

IBLI History
January 2010