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News: Drought-hit Borana Pastoralists receive insurance payout

Addis Standard staffs

Borana/Oromia, September 11/2019 – A livestock insurance product aimed at protecting pastoralists against calamity from drought made a payout to close to 3,000 Borana pastoralists following the extremely poor rains this year. Referred to as the Index-Based Livestock Insurance (IBLI), it is an innovative financial solution spearheaded by the International Livestock Research Institute (ILRI) with a commercial partner, Oromia Insurance SC (OIC),.

This year, the main March – June rainy season, locally called Ganna, and is responsible for an average of 60 percent of the annual rainfall in Borana, fell short, resulting in limited pasture regeneration and perceptible decline in milk production and live weight of animals. This in turn has negatively impacted the well-being of pastoralists, who rely on livestock for their daily subsistence. According to USAID, much of the pastoral regions of Somali and Southern Oromia are experiencing the second major drought since 2017, which has caused severe water shortages, catastrophic livestock losses, and humanitarian crises. And, solutions like livestock insurance will add to the efforts made by development partners through availing cash to purchase feed, water and medicine for animals during stressful seasons – but before pastorlalists experience any loss of animals.

IBLI was piloted in Borana pastoral zone in 2012, and operates based on the assumption that a significant risk in the area is rainfall variability – across seasons and places. According to Yihenew Zewdie (PhD), Program and Partnerships Manager at ILRI, IBLI uses a satellite-based forage monitoring platform to inform the timing and extent of insurance payouts to individual pastoralist policy holders before the underlying ‘risk’ – drought – happens. Insurance payment is effected when the estimated forage condition in an area fall below an agreed and pre-determined level of triggering threshold. This makes the insurance product unique as it avails resources to policy-holding pastoralists before drought strikes. The product is also referred to as Asset Protection Contract.  

On September 10, 2019, the underwriter of the insurance product, OIC, paid ETB 4.88 million to its policyholders. One of the beneficiaries of the payout, Aiysha Golicha (pictured below), who had insured her 20 cattle and 5 camels, explains ‘livestock insurance protects pastoralists during catastrophe’. She further added that after insuring her livestock, she does not have to wait for support from others as she receives payout before the failure of the rain causes severe impact on the animals.

Aiysha Golicha had insured her 20 cattle and 5 camels

Melkachew Temesgen, Microinsurance Director at OIC, stresses that the product they are underwriting not only provides compensation ahead of drought but also forage condition announcement contributes to informing pastoralists’ decisions concerning preparations they have to make to mitigate the challenges of forage scarcity.

According to information received by Addis Standard Ethiopia’s Ministry of Agriculture, Agricultural Transformation Agency (ATA), ILRI and other development partners are exploring options that would enable the consolidation and expansion of agricultural insurance in Ethiopia and thereby help overcome the critical operational and regulatory challenges facing the smallholder-focused agricultural insurance industry in the country. AS

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