Index-based livestock insurance: The case of Mongolia

The policy brief examines Mongolia's Index-Based Livestock Insurance (IBLI) project, a World Bank-supported initiative designed to protect herders from mass livestock losses caused by 'dzuds' (extreme weather). By using aggregated mortality indices rather than individual loss assessments, the program reduces transaction costs and provides financial security to sparsely populated areas. The system employs a tiered response: herders absorb losses under 6%, private Livestock Risk Insurance covers losses between 6-30%, and Government Catastrophic Coverage handles losses over 30%. While the program has successfully insured millions of animals and provided critical payouts, the brief emphasizes that insurance must be part of a broader strategy including sustainable grazing and veterinary improvements. Key success factors identified include the use of long-term census data, public education to drive demand, and the maintenance of affordable premiums through public-private partnerships.

• Mongolia's livestock sector is highly vulnerable to 'dzuds'—extreme weather events comprising drought, heavy snowfall, extreme cold, and windstorms—which are exacerbated by climate change and grassland degradation. In 2010, over 50% of herders were affected by extreme weather, and 75,000 herders lost more than half of their livestock.
• The Index-Based Livestock Insurance (IBLI) project, supported by the World Bank, provides a mortality-based insurance system available in every Mongolian province. Unlike traditional insurance, it triggers payouts based on aggregated livestock losses over a geographic area rather than individual household assessments, which reduces transaction costs and avoids moral hazard.
• The IBLI system uses a tiered payment structure based on mortality thresholds: losses below approximately 6% are absorbed by herders; losses between 6% and 30% are covered by Livestock Risk Insurance (LRI) purchased from private companies; and losses exceeding 30% are covered by Government Catastrophic Coverage (GCC).
• The project has demonstrated economic utility, with 16,000 policies bought in 2012 and approximately 10% of herders currently holding policies. Between 2006 and 2010, approximately 175,000 households insured over 3.2 million animals. Following dzuds in 2008, 1,783 herders received approximately US$340,000 (MNT389 million).
• For index-based insurance to be successful, it requires high-quality mortality data and affordable premiums. Mongolia utilized a livestock census conducted every December since the 1920s to establish these rates. Affordability is challenged by climate uncertainty, which may lead insurers to raise prices, and fluctuations in product values, such as a nearly 50% drop in raw cashmere prices between 2008 and 2009.
• The Government of Mongolia views insurance as one component of a broader risk management strategy to build climate resilience. This comprehensive approach includes promoting sustainable grazing to prevent desertification, introducing climate-resilient animal breeds, improving veterinary services, and using traditional knowledge to align animal numbers with pastureland carrying capacity.

APA

DeAngelis, K. (2013). Index-based livestock insurance: The case of Mongolia. Climate and Development Knowledge Network. http://cdkn.org/wp-content/uploads/2013/03/Mongolia_InsideStory_Pr4Final_WEB.pdf

Chicago

DeAngelis, Kate. Index-based livestock insurance: The case of Mongolia. Climate and Development Knowledge Network, 2013. http://cdkn.org/wp-content/uploads/2013/03/Mongolia_InsideStory_Pr4Final_WEB.pdf.

Wikipedia

{{cite report |last1=DeAngelis |first1=Kate |title=Index-based livestock insurance: The case of Mongolia |publisher=Climate and Development Knowledge Network |date=March 2013 |url=http://cdkn.org/wp-content/uploads/2013/03/Mongolia_InsideStory_Pr4Final_WEB.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{deangelis2013indexbased, author = {DeAngelis, Kate}, title = {{Index-based livestock insurance: The case of Mongolia}}, institution = {Climate and Development Knowledge Network}, year = {2013}, month = mar, url = {http://cdkn.org/wp-content/uploads/2013/03/Mongolia_InsideStory_Pr4Final_WEB.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }