Livestock owners in the arid town of Marsabit, in Northern Kenya, can now purchase an insurance policy that covers their animals against the effects of drought through the use of mobile money.
The Index Based Livestock Insurance cover has been unveiled by Kenya's APA Insurance in partnership with the International Livestock Research Institute (ILRI) and will cover cattle, sheep, goats and camels against drought for a period of one year up to September 30th 2013.
The over 2,500 livestock owners in Marsabit also have the option of purchasing the cover directly from insurance agents or making payments via mobile money. Pastoralists who take up the insurance cover could also receive compensation through mobile money transfer services.
The insurance cover further uses satellite and mobile phone technology to help determine potential losses and any subsequent compensation required by the insured pastoralist should a loss occur.
The satellite readings are said to be able to monitor and indicate inadequate rain or forage below the required level; thereby, prompting a pay-out to policyholders. Compensation will be issued when an index level, which predicts livestock mortality, reaches above 15%.
Policyholders are said not to have to file a claim in the event of a loss since payouts will be calculated automatically.
The policy is based on geographical clustering covering upper Marsabit which is more prone to drought, and lower Marsabit.
Northern Kenya is often faced with drought which leads to the starvation and death of cattle, sheep, goats and camels which are the primary source of livelihood for the regions communities. In the drought season, the price of livestock often declines by up to 50%.
“Marsabit being one of the regions at the heart of changing climatic conditions, made it the perfect region for this initiative,” said Simon Clayton, chief executive of APA Insurance.
“We are reaching out to provide a product that will go a long way in ensuring that pastoralists’ economic capacities and lifestyles remain unchanged. We are asking the pastoralists’ to view livestock the same as a mainline business person views risks that would affect their stock or building and take due protection,” Clayton added.
The average price for each cow or camel in Marsabit has been set at about Ksh15,000 ($178) Pastoralists will therefore insure each cow and camel at Ksh825 ($9.8). They can also insure 10 goats and sheep per year for Ksh487.5 ($5.8 ).
Up to a third of livestock in Marsabit district died in last years drought which also affected 3.5 million people in Kenya. Marsabit has about 86,000 cattle and two million goats and sheep.
The Kenya Meteorological Department forecast for the period of June-July and August predicated water scarcity and lack of pasture for livestock in arid and semi-arid areas following poor rainfall performance earlier in the year.
The Index Based Livestock Insurance is part of a Ksh1.15 Billion ($13.7 million) partnership between APA Insurance and Leapfrog Investments, an investment fund, which aims at providing insurance for the underserved people and markets in the region.
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