Examining the feasibility of livestock insurance in Mongolia

Topic :

This study examines the feasibility of offering insurance to compensate for animal deaths in Mongolia, given the unique role livestock plays in Mongolian culture and economy. This study focuses on the potential for using the livestock mortality rate at a local level (e.g., the sum or rural district) as the basis for indemnifying herders. In order to do this, the study examines three alternatives to insure livestock deaths in Mongolia:

  1. traditional livestock insurance that pays individual herders based on their specific losses;
  2. weather insurance that would pay when weather events that are likely to create serious losses occur; and
  3. index insurance that would pay when livestock mortality rates exceed certain thresholds by sum.

The study recommends that the insurance that is used in Mongolia should not interfere with the exceptional efforts that experienced herders take to save animals during sever weather. Using an individual insurance may diminish these efforts. Since index insurance would pay all herders in the same region at the same rate, the incentives for management to mitigate livestock losses remain strong. No-one would reduce their effort to collect on insurance. Those who increase their efforts during a major event would likely be compensated for this effort even though they do not lose livestock. In some cases, they could reasonable expect to receive payments that would compensate for the added effort or the added cost of trying to save their livestock.

The paper suggests a pilot test of the mortality insurance concept and provides the basic considerations and steps to follow for its implementation.

  • Resource type
  • Author Skees, J.; Enkh-Amgalan, A.
  • Organisation
  • Year of Publication2002
  • Region
  • Country
  • LanguageEnglish
  • Number of pages41 pp.
  • EditionWorking Papers

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