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This survey was conducted as part of research and development activities under the Index Based Livestock Insurance (IBLI) project in the Borena Zone of Ethiopia. The International Livestock Research Institute (ILRI) and in collaboration with Cornell University and implementing partners Oromia Insurance Company (OIC) and Oromia Credits and Saving Share Company (OCSSCO) piloted in August 2012 a market-mediated index-based insurance product, designed to protect pastoralists from drought-related livestock mortality, on the Borena plateau of Southern Ethiopia. The basic product design, household survey, and evaluation strategy mimic and complement that of a previously designed IBLI product in the Marsabit district of Northern Kenya, first rolled out two years earlier (2010).

IBLI is an innovative microinsurance product that insures pastoralists in the arid and semi-arid lands (ASALs) of Borena against livestock mortality that often follows catastrophic drought. Like other index based insurance products, IBLI contracts are not designed around policyholders’ actual losses, but instead an index that is calibrated to be highly correlated with those losses. Because severe forage scarcity is common during drought, the IBLI index tracks local vegetative conditions using freely available satellite data (ie, the Normalized Differenced Vegetation Index, hereafter NDVI) to calculate indemnity payments for policy holders. When the index hits a pre-determined threshold indicative of large-scale livestock loss—the 15th percentile of the historical distribution at the Woreda-level since 1981—then IBLI policy holders receive a payout based on the amount and …