Examining the Feasibility of Livestock Insurance in Mongolia

The paper states that traditional insurance approaches that insure individual animals are simply not workable, as the opportunities for fraud and abuse are significant, while the monitoring costs required to mitigate this behavior would be very high. Drawing from Mongolia, it says that although herders have suffered tremendous losses in recent winter disasters with mortality rates of over 50% of the livestock in some locales, livestock insurance is challenging given the vast territory in which herders tend over 30 million animals. The paper also:

• Examines the feasibility of offering insurance to compensate for animal deaths;
• Discusses why mandatory individual insurance would run counter to the goal of improving risk mitigation strategies among herders;
• Examines three alternatives (traditional livestock, weather and index insurance) to insure livestock deaths.

Concludes that no approach will be easy and none offers the perfect answer, but that mortality index insurance appears to offer the best choice.