On average, AMA Innovation Lab researchers find that after the drought, insurance leads to a 36 percent decrease in sales of remaining livestock, and a 25-percent reduction in household meal consumption.
Index insurance shows considerable promise, especially in settings like the arid and semi-arid lands of east Africa where conventional insurance to cover potentially catastrophic herd losses does not exist.
The Borana plateau in southern Ethiopia is a vast arid and semi-arid pastoralist territory. Livestock in this area comprise the majority of household’s non-human capital and are responsible for more than two-thirds of their average income.
Pastoralist households in the arid and semi-arid areas of northern Kenya are especially vulnerable to the risk posed by climate change. This risk-reduction strategy has the effect of keeping households poorer than they need to be.
An important aspect of this evaluation will explore whether or not the asset accumulation and productivity effects of insurance are sufficiently robust that they create a case for subsidizing insurance premiums as an alternative to cash transfers or food aid.