Transcript Index Based Livestock Insurance Project, Mongolia

IBLIP, Mongolia
INDEX-BASED LIVESTOCK
INSURANCE
PROJECT IN MONGOLIA
1.
Why Government of Mongolia
wants to implement this pilot
project?
1. Importance of the project
 Article 5.5 of the Constitution states:
“ livestock is a national wealth and must be
protected by the Government”
1. Importance of the project
 Agricultural sector – 20% of national GDP
in the Mongolian economy.
 Livestock sector - 87% of agricultural
GDP.
 Livestock husbandry supports ½ of the
population, particularly in rural areas.
1. Importance of the project
 However, extreme climatic events cause high
rates of livestock mortality, jeopardizing rural
livelihoods:
 Example: 1999 to 2002
 frequent droughts and severe
winters/springs (known as dzuds) caused
loss of 1/3 of the national herd,
 81,000 households lost ½ of their livestock,
 12,100 households lost all livestock
 GDP growth drop to 1.1%
1. Importance of the project
 Mandatory livestock insurance before
1990
 Voluntary livestock insurance since 1990
 1990 - livestock privatized
BACKGROUND:
Situation with Livestock Insurance
 Very little livestock insurance is being sold
today in Mongolia.
 Livestock risks are considered to be
uninsurable due to very large risk.
 Herders are dissatisfied of past failures in
paying indemnities/low animal values on
insurance.
 Lack of local branches to offer insurance in
the country side/ poor contracts.
BACKGROUND:
Needs for New Livestock Insurance
 Since 1995 three attempts of the Government to create
and implement mandatory livestock insurance have
failed due to lack of feasibility and expected high
administrative cost and high exposure to major cost
during the event.
 The index-based livestock insurance (IBLI)
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

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is linked to the direct outcome from dzud – high livestock
mortality
provides incentives to continue to manage herds by
herders
low administrative cost for ICs
secure indemnity payments to insured
pays out whenever the mortality rate in the local region
(soum) exceeds a specific threshold.
2. Current progress and
updates of the project
Project’s Development Goal
 The development objective of the IBLI project
would be to ascertain the viability of index-based
livestock insurance in Mongolia.
This would be achieved through:


Developing and piloting IBLI program in three
provinces of Mongolia; and
Building institutional capacity and legal
framework for the prospective replication and
scale-up of IBLI nationwide.
The IBLIP is to be implemented by the
Government of Mongolia with financial
assistance from IDA, World Bank, Japanese
Government and FIRST Initiative from
September 2005 to June 2010.
Pilot Aimags


Implementation is on going in 3 provinces: Bayankhongor,
Khentii and Uvs.
Provinces were chosen considering geographical dispersion
(different types of climate and terrain), agro-climatic variation
and relative risk (low correlation of livestock losses).
Layers of the Risk
100% Mortality
Disaster Response
Product
30% Mortality
Base Insurance Product
6% Mortality
Retained by
Herders
IBLI Sales
2007 Sales
Result
2008 Sales
Result
Total insured
herders: 2412
Total insured
herders: 3705
Total insured
herders: 4047
Bayankhongor
aimag:949
herders (8.3%)
Uvs aimag:1184
herders (12%)
Khentii
aimag:279
herders (4.2%)
Bayankhongor
aimag:1708 herders
(14.7%)
Uvs aimag:1431
herders (14.2%)
Khentii aimag:566
herders (7.9%)
Bayankhongor
aimag:1910 herders
(16%)
Uvs aimag:1388
herders (13%)
Khentii aimag:749
herders (10%)
Total livestock
insured: 409000
heads (5.8%)
Total livestock
insured: 489800
heads (6%)
2006 Sales
Result
Total livestock
insured: 292000
heads (5.5%)
IBLI Sales
2007 Sales
Result
2008 Sales
Result
3 Insurance
companies
4 Insurance
companies
4 Insurance
companies
144 Insurance
agents
154 Insurance
agents
183 Insurance
agents
Total premium
collected: 85.5
million MNT
Total premium
collected: 129.1
million MNT
Total premium
collected: 140.1
million MNT
2006 Sales
Result
Indemnity payments
2006 Sales Result
2007 Sales Result
Total insured herders: 2412
Total insured herders: 3705
Total indemnity payment received
herders: 47
Total indemnity payment received
herders: 1742
Total premiums collected: 85.5 million
Total premiums collected: 129.1 million
Total indemnity payments: 1.8 million
Total indemnity payments: 380 million
Insurance coverage: all 56 soums of
3 pilot aimags
Insurance coverage: all 56 soums of 3
pilot aimags
Indemnity coverage: 2 soums of 2
aimags
Indemnity coverage: 35 soums of 3
aimags
Financial Linkages:
Current achievements
“XAC Bank”
• 0.1% discount on loan monthly interest
• Up to 14 months loan
“Mongol Post Bank”
• Extendable loan amount
“Khan Bank”
Mongolia)
(Agricultural Bank of
• 0.1% discount on loan monthly interest
• Extendable loan amount
3. Challenges
Data
Insurance companies
1. Data
Accurate, affordable, and timely methods
for estimating livestock losses
 Accuracy
 National statistics office responsible for
official statistics data
 Full time census twice a year? New method
like sample survey?
2. Insurance companies
 Profitable?
 Reinsurance
 Delivery systems
Thank you for your attention!
For more information please visit our website at
www.iblip.mn
Project Implementation Unit
Ulaanbaatar, Mongolia
Tel: 976-70112005
E-mail: [email protected]