Business of protecting wealth from drought

Every time drought ravages the country, the images of the north are of dusty plains dotted with carcasses of livestock that have died a bloodless death.

The foremost question each time is why it continues to occur, despite billions of shillings being allocated to fighting drought under the four regimes that have ruled the country.

But in the dust and despair, there are efforts to make up for the rain god’s seasonal leave of absence. An insurance scheme started after the 2011 drought that saw herders lose 40 per cent to 60 per cent of their livestock is showing promising results.

The Government and private insurance companies – including Takaful, APA, Amaco, CIC, Heritage, Jubilee, Kenya Orient and UAP – will pay out more than Sh224 million to herders who signed up for the cover last year.

These different insurance companies have partnered with the International Livestock Research Institute (ILRI), both in Ethiopia and Kenya, to protect livestock.

More than 11,750 herders across Northern Kenya (Marsabit, Isiolo, Wajir, Garissa and Mandera counties) and 3,905 pastoralists from 10 districts in Southern Ethiopia (Borana region) purchased the insurance contracts.

Since 2013, Takaful Insurance has also registered more than 7,000 farmers and insured 107,800 livestock across seven counties.

The Government provided an additional 9,000 households in Wajir, Turkana, Marsabit, Mandera, Isiolo and Tana River counties with coverage through the Kenya Livestock Insurance Programme (KLIP) in October 2016.

These numbers, however, may be modest for these counties as a result of confusion on how the insurance cover is calculated.

Initially, the Government used to replace a percentage of dead animals at an average of 15 per cent – this meant if you had 100 cattle, you would get 15 cattle.

A local insurance broker added that the Government would sit with village elders and choose a household to compensate as the Treasury rescue package has never been enough for all.

Insurance firms initially avoided livestock insurance as it was difficult to verify losses for pastoralists whose animals are spread across large, remote areas.

Vegetation cover

Duncan Khalai, a market and capacity development specialist, said this changed when the Index-Based Livestock Insurance (IBLI) was introduced.

It uses satellite data on vegetation cover, allowing insurance firms to pay herders for the cost of keeping an animal alive when forage is too low for it to survive.

“Ours is asset protection, not asset replacement. You do not have to wait for the animal to die,” said Anne Gatuma, the project administrator at Takaful Insurance.

The new model pays herders at the onset of a drought, allowing them to buy fodder for their animals.

Mr Khalai said farmers pay premiums of Sh100 for a goat, Sh1,200 for a cow and Sh2,000 for a camel. With these contributions, they get a cover of Sh1,400 for a goat, Sh14,000 for a cow and Sh19,600 for a camel. They are then compensated at a rate of 58 per cent during a long dry season and 42 per cent in a short dry season.

When the index signals forage conditions have deteriorated to the point that animals are likely to die, IBLI compensates herders to help prevent livestock losses.

As at February, all weather divisions in Tana River, Garissa and Moyale were out of forage. In Marsabit, forage is between 7 and 13 per cent. In Isiolo, Mandera and Wajir, some places have triggered the compensation point.

ILRI said the insurance has a multiplier effect as herders are not forced to sell their animals en masse, and it leads to a 33 per cent reduction in reliance on food aid.

Insured herders are also more likely to reduce their overall herd size, indicating they no longer feel the need to maintain surplus animals as a hedge against drought losses.

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