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

The document examines Mongolia's transition from reactive post-disaster funding to a proactive risk management framework for its livestock sector, specifically through the Index-Based Livestock Insurance Project. It details the challenges posed by dzuds—severe winter weather events—and the failure of traditional indemnity insurance. The project utilizes mortality-based index insurance to reduce transaction costs and moral hazard, offering products like Livestock Risk Insurance and Government Catastrophic Coverage. While facing challenges such as cashmere price declines and data collection needs, the project has exceeded adoption targets and attracted international reinsurance, with plans for nationwide coverage by 2012.

• Dzuds, severe winter conditions involving low temperatures, wind, snow, and ice, cause catastrophic livestock losses in Mongolia; for example, the 2009/2010 season resulted in 9.7 million animal deaths and approximately USD 477 million in financial losses.
• Traditional indemnity-based insurance was deemed ineffective for Mongolia's herding sector due to high transaction costs of assessing animals across vast areas, adverse selection, and moral hazards.
• The Index-Based Livestock Insurance Project uses mortality rates collected by the National Statistical Office to trigger payouts, which reduces administrative costs and provides quicker payouts than individual loss assessments.
• The project employs a risk-layering approach with different products: Livestock Risk Insurance (LRI) for commercial risks (mortality between 6% and 30%), and Government Catastrophic Coverage (GCC) for losses exceeding 30%.
• To protect commercial insurers from bankruptcy during high-mortality events, the project established the Livestock Insurance Indemnity Pool (LIIP), with the Government of Mongolia providing further reinsurance via a World Bank-financed Contingent Debt Facility.
• The project has exceeded its performance targets, with 83% of herders in pilot soums aware of the products and sales of the base insurance product consistently surpassing the 5% target.
• Long-term climatic trends in Mongolia from 1940 to 2004 include a mean temperature increase of 1.9 degrees Celsius and a 20-24 percent decline in water sources between 1990-1997, contributing to desertification.

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} }