The aim of the initiative is to help vulnerable communities in drought-prone areas in the Afar and Somali regions, and North and South Omo zones respond to climate shocks.
Working on the insurance products with leading Ethiopian insurance company Nyala Insurance, the NGO Mercy Corps and consultancy firm Pula Advisers, Farm Africa is currently trialling two different models of drought insurance. Model A is indemnity insurance linked to microfinance. This allows customers to take out loans to purchase cattle that includes insurances against the loss of their animals due to disease, theft, accidents, etc. Under Model B pastoral asset protection, customers of veterinary supply retailers buying animal vaccines pay a small additional margin to buy a contract that triggers a payout if there is localised drought.
The idea behind the initiative is that when faced with impending catastrophe, access to insurance can help people make appropriate investment decisions that do not compromise their long-term resilience. The availability of insurance could also potentially stimulate investment into the livestock economy in vulnerable areas. Microinsurance is another way to help address financial inclusion among the vulnerable, alongside mobile banking and other schemes
The initiative is part of the MAR project, which is part of the Building Resilience and Adaptation to Climate Extremes and Disasters (BRACED) programme funded by the UK's Department for International Development.