2007年-世界发展银行全球_Innovating_to_Reduce_Risk___The_Case_of_Livestock_Insurance_in_Mongolia_4页_776kb

1st Annual Golden Plough Award for Innovative Project Design: Summary

Core Content

The 1st Annual Golden Plough Award for Innovative Project Design was presented to the Mongolia Index-Based Livestock Insurance (IBLI) Project in 2005. This project aimed to address the severe weather-related risks faced by Mongolian herders, particularly from dzuds (severe winter-spring colds) and droughts, which have historically caused massive livestock mortality and economic losses.

Main Points

Context of Livestock in Mongolia

• Livestock husbandry dominates Mongolia's agriculture, contributing 87% of agricultural GDP and employing 40% of the agricultural workforce.
• Herders are highly vulnerable to catastrophic weather shocks, such as dzuds.
• Between 1999 and 2002, dzuds led to the loss of one-third of the national herd, increasing rural poverty to 43.2% by 2004.

Challenges in Risk Management

• Traditional risk management strategies, such as government restocking programs, are expensive, inefficient, and may incentivize poor herding practices.
• Individual livestock insurance is unpopular and unsustainable, due to moral hazard and high verification costs.
• The scale of losses during dzuds made government resources insufficient for full coverage.

The IBLI Project

• The Mongolia IBLI Project was launched in 2005 to pilot a new form of insurance.
• It is implemented in three provinces: Bayankhongor, Uvs, and Khenti.
• The project consists of five components:
  1. Pilot of two IBLI products:
     • Base Insurance Product (BIP): A commercial insurance product sold by insurance companies, with premiums paid by herders. Payouts occur when district mortality rates exceed a trigger percentage (7–10%, depending on species and location).
     • Disaster Response Product (DRP): A government-funded safety net that begins payments when mortality rates exceed the BIP threshold. Herders who purchase BIP are automatically registered for DRP at no additional cost.
  2. Promotional and awareness activities to inform stakeholders.
  3. Institutional capacity building to support the expansion of insurance products.
  4. Monitoring and evaluation of different social groups and behavior changes.
  5. Support for project implementation.

Innovation and Sustainability

• IBLI is an innovative solution that avoids individual loss verification, making it more affordable and sustainable.
• It reduces moral hazard and does not reward poor management.
• The project's sustainability depends on private insurance companies' decisions, access to reinsurance markets, and institutional support.
• The DRP introduces fiscal risk for the government but is seen as a necessary complement to BIP, reducing the need for costly restocking programs.

Replicability

• IBLI is inspired by area-based index insurance for crops, which has been successfully implemented in countries like India, Mexico, and the US.
• The project incorporates financial and actuarial methods to improve discipline and risk transfer to international reinsurance markets.
• Lessons from the IBLI pilot can be replicated in other countries facing similar challenges.

Expected Outcomes and Poverty Impact

• The project is an enabling operation, aiming to enhance livelihood security for herders.
• It is expected to reduce vulnerability to livestock mortality and support productive activities like replacing livestock and improving risk preparedness.
• Poorer herders are more likely to purchase insurance, indicating its potential to alleviate rural poverty.

Key Information

• Project Duration: Piloted in 2005, with a focus on sustainability and replicability.
• Target Population: Rural herding households, particularly those affected by dzuds.
• Innovation: Index-based livestock insurance that avoids individual loss verification.
• Funding: Supported by the World Bank, with a credit of SDR 5.14 million.
• Recognition: Received the 2005 Golden Plough Award for its innovative design, contribution to rural development, and focus on sustainability.

Conclusion

The IBLI project in Mongolia represents a groundbreaking approach to managing catastrophic livestock mortality risks. By combining index-based insurance with disaster response mechanisms, it aims to enhance financial resilience among herders and reduce the burden on government resources. The project's innovative design, institutional support, and potential for replication make it a model for other countries with similar challenges.