Index-based livestock insurance to manage climate risks in Borena zone of southern Oromia, Ethiopia

Abstract

Index-based livestock insurance has been introduced in Borena zone of southern Ethiopia by the International Livestock Research Institute working in partnership with Oromia Insurance Company and humanitarian agencies since 2012 as an instrument to help protect pastoralists’ herders against drought related mortality of livestock. Despite the some positive success to the concerted efforts, the continued adoption of index-based livestock insurance by pastoralists and agro-pastoralists has been limited. The current study highlighted the status, and determinants of index-based livestock insurance to managing risks resulted from the changing climate in the study area. The study used household surveys from 359 sampled households, key informant interviews, and focus group discussions to collect the data. Descriptive statistics (i.e. frequency, percentage, mean, and standard deviation), inferential tests (Chi-square test and t-test), and binary logit model were used to analyze the collected data. The results of the current study evidenced that the adoption of indexed insurance is below expectation. The results further indicated that several factors appeared to affect demand for index-based livestock insurance. Those households in a farming system with moisture stress, those who perceived climate risks, those who aware the insurance, who are better educated, who have access to credit and off-farm activity are more likely to adopt the index-based livestock insurance. Furthermore, households who have a membership to a large number of social organizations are more likely to purchase the insurance. However, households who are far from the weather station and old aged households are less likely to purchase index-based livestock insurance. Adaptation pathways to support the uptake of index-based livestock insurance must take in to account these critical factors influencing household’s decision to adopt the insurance scheme. It is also imperative to integrate the insurance into indigenous institutions and link it with the local development process.