Over 2,500 pastoralists in the Marsabit region can insure their cattle, sheep, goats and camels against drought. APA Insurance has announced an Index Based Livestock Insurance cover specific for the region. APA Insurance, a member of The Apollo Group aspires to build up to a KES 1.15 billion strategic partnership with Leapfrog Investments – a leading investment fund for this venture.
Every insurance policy holder within the same division however, will receive the same rate of insurance payments. The average price for livestock across Marsabit has been arrived at KES 15, 000 for a cow and camel and an equivalent for 10 goats and sheep, upper Marsabit having a higher risk will get a consumer price of 5.5% while lower Marsabit got a consumer price of 3.25%. Pastoralists will therefore insure each cow and camel at KES 825 and KES 487.5 for 10 goats and sheep per year.
The Index based livestock cover will be based on the weather department’s satellite readings to capture actual satellite measure called Normalized Differenced Vegetation Index (NDVI) that clearly measures forage availability and cannot be manipulated either by the insurer or the insured.
Leap Frog invests in financial services businesses, mostly companies that provide insurance, in Africa and Asia and its partnership with APA is geared at availing insurance for the under-served people and markets in the region.
APA Insurance will also partner with the International Livestock Research Institute (ILRI) to utilize both satellite and mobile phone technology for product development and monitoring, sales, customer data maintenance; determining potential loss and subsequent compensation of the insured pastoralist when losses occur.
This index based insurance will protect against shared risks and pay-outs will be calculated automatically because unlike other insurance products that assess loss on a case by case basis and later making payouts based on individual client loss. There will be no need for claims as the process and details will be known in advance.
The availability of this insurance cover will translate to advantages such as financial institutions recognizing livestock as collateral thereby enabling the insured access credit and engage in preferred economic activities. Livestock loss will now be catered for by insurance, which will provide yearly cover. The policy is based on geographical clustering covering upper and lower Marsabit based on two separate contracts due to the clear agro-ecological and pastoral production system differences as well as differences in risk.
The index Based Livestock Insurance makes a pay-out which is initiated on attainment of an index level which predicts mortality above 15%. This approach is based on the established statistical relationship between area-average livestock mortality and forage availability within a geographically defined space.