Building Resilience to Extreme Weather: Index-Based Livestock Insurance in Mongolia

This case study examines the implementation of the Index-Based Livestock Insurance Project in Mongolia, designed to mitigate the financial devastation caused by dzuds (severe winter weather). The project transitions the country from reactive, ex post disaster funding to a proactive, ex ante risk management strategy using mortality-based indices rather than individual loss assessments.

• Mongolia's livestock sector is highly vulnerable to 'dzuds'—severe winter conditions involving low temperatures, wind, snow, and ice—which can cause massive livestock mortality. For example, the 2009/2010 season resulted in the deaths of 9.7 million head of livestock and approximately USD 477 million in financial losses.
• The Government of Mongolia is shifting from a reactive approach based on ex post funding to a proactive ex ante risk management strategy to reduce reliance on international donors and development banks for post-disaster relief.
• A World Bank feasibility study determined that index-based mortality insurance is the most viable option for Mongolia over traditional indemnity-based or weather-based index insurance. This is because it reduces administrative costs, minimizes moral hazard and adverse selection, and utilizes existing high-quality mortality data from the National Statistical Office.
• The Index-Based Livestock Insurance Project utilizes a layered risk approach. The Livestock Risk Insurance (LRI), a commercial product, triggers payouts when soum mortality rates are between 6% and 30%. For losses exceeding 30%, the Government Catastrophic Coverage (GCC) provides a safety net for policyholders.
• To protect commercial insurance companies from bankruptcy due to high mortality events, the project established the Livestock Insurance Indemnity Pool (LIIP). This fund pools premiums and ensures policies are honored even if a carrier fails, with the Government of Mongolia providing further reinsurance via a World Bank-financed Contingent Debt Facility.
• The project has exceeded its initial performance targets. By June 2010, it had completed four cycles, with the number of policies sold increasing from 2,222 in the first season to 6,977 in the fifth. Between 2006 and 2010, a total of 3.2 million head of livestock were insured.
• The insurance project has positively influenced the financial sector, as Mongolian banks have begun offering loans at decreased interest rates to herders who hold index-based mortality livestock insurance policies.

APA

LUXBACHER, K., & GOODLAND, A. (n.d.). Building Resilience to Extreme Weather: Index-Based Livestock Insurance in Mongolia. World Resources Institute. https://files.wri.org/d8/s3fs-public/wrr_case_study_index_based_livestock_insurance_mongolia_.pdf

Chicago

LUXBACHER, KIRSTEN, and ANDREW GOODLAND. Building Resilience to Extreme Weather: Index-Based Livestock Insurance in Mongolia. World Resources Institute, n.d. https://files.wri.org/d8/s3fs-public/wrr_case_study_index_based_livestock_insurance_mongolia_.pdf.

Wikipedia

{{cite report |last1=LUXBACHER |first1=KIRSTEN |last2=GOODLAND |first2=ANDREW |title=Building Resilience to Extreme Weather: Index-Based Livestock Insurance in Mongolia |publisher=World Resources Institute |url=https://files.wri.org/d8/s3fs-public/wrr_case_study_index_based_livestock_insurance_mongolia_.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{luxbacherndbuilding, author = {LUXBACHER, KIRSTEN and GOODLAND, ANDREW}, title = {{Building Resilience to Extreme Weather: Index-Based Livestock Insurance in Mongolia}}, institution = {World Resources Institute}, url = {https://files.wri.org/d8/s3fs-public/wrr_case_study_index_based_livestock_insurance_mongolia_.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }