Index-based livestock insurance: The case of Mongolia

The document examines Mongolia's Index-Based Livestock Insurance (IBLI) project, which provides financial security to herders facing 'dzuds' (extreme weather events). Unlike traditional insurance, IBLI triggers payouts based on aggregated mortality rates rather than individual losses, reducing transaction costs and moral hazard. The project, supported by the World Bank, integrates market-based insurance with government catastrophic coverage to protect against mass livestock losses. The brief emphasizes that for such programs to be sustainable, they require high-quality mortality data, affordable premiums, and integration into a broader risk management strategy that includes sustainable grazing practices and veterinary services.

• Mongolian herders are 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, and 75,000 lost more than half their livestock.
• The Index-Based Livestock Insurance (IBLI) project uses a tiered payment system: losses below 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).
• IBLI offers several advantages over traditional insurance, including lower transaction costs and the avoidance of 'moral hazard' because payments are automatically triggered by mortality thresholds rather than individual assessments. It also provides faster fund distribution than traditional emergency aid.
• The program's success depends on high-quality historical and current data on livestock mortality. Mongolia leverages a livestock census conducted every December since the 1920s to ensure payments are neither too low to be effective nor too high to be sustainable for insurers.
• Affordability remains a challenge; most herders currently insure only about 30% of their livestock. Factors impacting affordability include climate uncertainty, which may drive up premiums, and fluctuations in the market value of products like cashmere.
• Insurance is most effective when integrated into a comprehensive risk management strategy. The Government of Mongolia promotes this by encouraging rain and flood water harvesting, adjusting animal numbers to pasture carrying capacity, and introducing climate-resilient breeds.

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} }