29 July 2008: Livestock Insurance Schemes A Must In Combating Cattle Rustling

The standard practice when securing life and property against unexpected occurrences is to take out insurance. Even though insurance schemes have been around for several decades now, pastoralists in most parts of Eastern Africa are not insured. With worsening global climate change, livestock insurance is indeed inevitable. Insurance can also serve as an important tool towards addressing the problem of cattle rustling, which in some cases occur in an attempt to replenish stock after a long spell of drought.

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By and large, pastoralists interpret their world as an interaction between livestock, environment and themselves. Today, climate change is impacting increasingly on the already volatile livelihood of the pastoralist. Severe drought; forest encroachment leading to interference with water catchment areas; competing production systems; livestock diseases and related calamities; lack of clear land policies; violent conflict and cattle rustling are some of the main threats faced by pastoralists. During periods of severe drought, for example, pastoralists face serious risks and most households become vulnerable and destitute. All these factors have rendered pastoral economy a very precarious enterprise.

Instead of using formal market institutions like credit and insurance systems, pastoral households pursue implicit insurance arrangements from extended families, clans, ethnic groups and neighbourhood support with a view to cope in times of crisis. In most cases, traditional forms of insurance have not been viable due to the vastness of the calamities. For example, when a devastating drought hits a region, both the insured and the insurer are vulnerable and hesitant to enter into any arrangement. Under such circumstance, households pursue different coping strategies such as sending a family member to respective cities for wage employment while some choose to organise raids to replenish lost herds. Even though both means may present an opportunity and could be an integral part of the coping mechanism, the negative impact associated with raids is cause for alarm and condemnation.

Over the past decade, politicians and analysts within East Africa have used different forums to underscore the urgent need for livestock insurance schemes. The aim of such calls has been to draw the attention of the pastoralist to the need for a cushion against natural phenomena and tendencies like unreliable rainfall and infertile soil. Related to this arethe lack of investor incentives and the lack of liquid resources for pastoralists to pay required premiums to the insurance company. Also, religious perceptions of insurance might discourage some pastoralist communities. As the situation demands, a favourable insurance index withstanding the test of time needs to be designed.

One example of an initiative to establish livestock insurance in Kenya is under way, courtesy of the International Livestock Research Institute (ILRI). The institute intends to pioneer a pilot insurance project among the pastoralist of northern Kenya and a survey is being done in some parts of the region. In countries where livestock insurance schemes have been tried, the market offered three types of products, some achieving successrates that could be emulated:

Firstly the individual coverage approach where the herder is compensated depending on the number of livestock lost. Indeed, this is a good approach but it is susceptible to high administrative costs.
Secondly, a weather-based insurance index which the system uses weather indicators as its basis. It requires historical weather data in order to develop the necessary weather index reflecting the complexity of the phenomenon. The extent to which data might be reliable within global climate change renders the approach questionable and perhaps expensive, as additional data system support might be required.
Lastly there is themortality-based insurance index. In this scheme, the insurance compensates individual herders whenever the livestock mortality rate in a local region exceeds a specific threshold. The scheme postulates that herders retain small losses that do not affect the viability of their business, while the larger losses are transferred to the private insurance company and the government. This system is not prone to moral hazard, adverse selection and administrative cost but it requires aninventory of livestock species and census every year in all the local regions. The popularity of this method is increasing all over the world and has proved to be a good basis for insurance, even though it is not a perfect solution.

In spite of the aforementioned challenges, insurance technology is an opportunity that pastoralists anticipate with great expectation. It can significantly reduce the vulnerability of the pastoral economy and by default curb practices like cattle rustling. As research attests, there is some correlation between vulnerability and cattle rustling.

It is therefore important for the governments within the countries implementing the Protocol on the Prevention, Combating and Eradication of Cattle Rustling in Eastern Africa to pursue livestock insurance schemes. Essentially, the growth of the pastoral economy will be highly dependent on livestock insurance at present and in the future. By exploring this possibility, the governments would contribute tremendously towards improved human security and towards developing sustainable pastoral livelihood strategies based on an innovative and tangible approach.

Tari Doti, Intern: Mifugo Project, ISS Nairobi