Index based livestock insurance pays out due to drought in Kenya

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Kenya is again suffering from a drought which is causing hardship and deaths among the millions of affected people in the region. The resulting food crisis is one of the worst seen and despite the global awareness of the plight of drought affected Africans the support they receive remains minimal. However the drought has shown that a new index based microinsurance product is viable.

This isn’t a weather index based insurance product, rather it uses an index of satellite observation of the grazing lands to provide a way to measure when the policies are triggered. The payouts are triggered when satellite images show that grazing land in the region has deteriorated so much that farmers are expected to be losing more than 15% of their herd of livestock. Currently the readings for which claims are being paid show losses of 18% to 33% of herds due to drought this season.

As with many of the early microinsurance schemes it’s not a perfect solution but it does help local smallholder farmers recover and sustain their businesses for longer under drought conditions. The use of weather, and in this case grazing indices to trigger policies helps to make insurance more understandable and predictable in developing regions of the world where insurance can be a new concept to many.

More details can be found in this press release.

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