Managing Agricultural Risk at the Country Level : The Case of Index-Based Livestock Insurance in Mongolia

Mahul, Olivier; Skees, Jerry

Managing Agricultural Risk at the Country Level : The Case of Index-Based Livestock Insurance in Mongolia

Autores

Mahul, Olivier

Skees, Jerry

Editor

World Bank, Washington, DC

Descripción

This paper describes the index-based livestock insurance program in Mongolia designed in the context of a World Bank lending operation with Government of Mongolia and implemented on a pilot basis in 2005. This program involves a combination of self-insurance by herders, market-based insurance, and social insurance. Herders retain small losses, larger losses are transferred to the private insurance industry, and extreme or catastrophic losses are transferred to the government using a public safety net program. A syndicate pooling arrangement protects participating insurance companies against excessive insured losses, with excess of loss reinsurance provided by the government. The fiscal exposure of Government of Mongolia toward the most extreme losses is protected with a contingent credit facility. The insurance program relies on a mortality rate index by species in each local region. The index provides strong incentives to individual herders to continue to manage their herds so as to minimize the impacts of major livestock mortality events; individual herders receive an insurance payout based on the local mortality, irrespective of their individual losses. This project offered the first opportunity to design and implement an agriculture insurance program using a country-wide agricultural risk management approach. During the first sales season, 7 percent of the herders in the three pilot regions purchased the insurance product.

Palabras clave

ACCIDENT, ACCOUNTING, ADMINISTRATIVE COSTS, AGENTS, AGRICULTURAL INSURANCE, AGRICULTURAL PRODUCTION, ATTACHMENT POINT, BANK LENDING, BANK POLICY, BANKS, BASIS RISK, CAPITAL GAINS, CAPITAL INVESTMENT, CAPITAL MARKETS, CAPITAL REQUIREMENTS, CAPITALIZATION, CATASTROPHE BONDS, CATASTROPHES, CATASTROPHIC EVENTS, CATASTROPHIC INSURANCE, CATASTROPHIC LOSS, CATASTROPHIC LOSSES, CATASTROPHIC RISKS, COINSURANCE, COLLECTIVE ACTION, COLLECTIVE ACTION PROBLEM, COMPETITIVENESS, COMPULSORY INSURANCE, CONDITIONS OF COVERAGE, CONSUMERS, CONTINGENT DEBT, CONTINGENT LIABILITIES, CORPORATE INVESTMENT, COUNTRY RISK, CREDIBILITY, CROP INSURANCE, CROP INSURANCE SCHEME, DAMAGES, DEATH RATES, DEBT BURDEN, DEFAULT RISK, DEPOSIT, DEVELOPING COUNTRIES, DISASTER, DISASTER AID, DISASTER ASSISTANCE, DISASTER EMERGENCY, DISASTER RECONSTRUCTION, DISASTER REHABILITATION, DISASTER RELIEF, DISASTER RESPONSE, DISASTER RISK, DISASTERS, DISBURSEMENT, DIVERSIFIED PORTFOLIO, DROUGHT, DROUGHTS, DUE DILIGENCE, EARTHQUAKE, EARTHQUAKE INSURANCE, EARTHQUAKES, EMERGENCY RELIEF, EQUIPMENT, ERL, EXCESS OF LOSS REINSURANCE, EXPENDITURES, EXTREME EVENTS, FAIR PRICE, FARMER, FARMERS, FINANCIAL EXPOSURE, FINANCIAL INTERMEDIARIES, FINANCIAL MARKETS, FINANCIAL SERVICES, FINANCIAL SUPPORT, FISCAL BURDEN, FISCAL CONSTRAINTS, FLOODS, FOOD SECURITY, FRAUD, GOVERNMENT SUPPORTS, GRACE PERIOD, HEALTH INSURANCE, HOUSING, INDEMNITIES, INDEMNITY, INDEMNITY PAYMENTS, INFORMAL LENDERS, INFRASTRUCTURE LOANS, INSURANCE, INSURANCE AGENTS, INSURANCE CLAIMS, INSURANCE COMPANIES, INSURANCE COMPANY, INSURANCE CONTRACTS, INSURANCE COVERAGE, INSURANCE FUNDS, INSURANCE INDUSTRY, INSURANCE LAW, INSURANCE MARKET, INSURANCE PENETRATION, INSURANCE POLICIES, INSURANCE POLICY, INSURANCE POOLS, INSURANCE PREMIUM, INSURANCE PREMIUMS, INSURANCE PRODUCT, INSURANCE PRODUCTS, INSURED LOSSES, INSURER, INSURERS, INTEGRITY, INTEREST RATES, INTERNATIONAL AGENCIES, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INVESTMENT DECISIONS, LAWS, LEGAL ENVIRONMENT, LENDING INSTRUMENTS, LIABILITY, LIABILITY INSURANCE, LINE OF CREDIT, LIQUIDITY, LOAN, LOAN TERMS, LOCAL GOVERNMENT, LOSS RATIO, MARKET SHARE, MARKET SHARES, MICRO FINANCE, MICROFINANCE, MITIGATION, MITIGATION MEASURES, MORAL HAZARD, MORAL HAZARDS, MULTILATERAL DEVELOPMENT BANKS, NATURAL DISASTERS, NATURAL HAZARDS, NON-LIFE INSURANCE, OPERATING COSTS, OPPORTUNITY COSTS, PLEDGES, POOR FARMERS, PORTFOLIO REINSURANCE, PREMIUM PAYMENTS, PREMIUMS, PRIVATE CAPITAL, PRIVATE INSURANCE, PRIVATIZATION, PROFITABILITY, PROGRAMS, PROPERTY INSURANCE, PUBLIC INSURANCE, PUBLIC INVESTMENT, PUBLIC SAFETY, REINSURANCE AGREEMENT, REINSURANCE CAPACITY, REINSURANCE COMPANIES, REINSURANCE CONTRACT, REINSURANCE MARKETS, REINSURANCE PREMIUMS, REINSURANCE TREATY, REINSURER, REINSURERS, RELIEF, RESERVE, RESERVE FUND, RESERVE FUNDS, RESERVES, RESOURCE ALLOCATION, RETURN, RISK ANALYSIS, RISK ASSESSMENT, RISK CAPITAL, RISK EXPOSURE, RISK EXPOSURES, RISK MANAGEMENT, RISK MANAGEMENT MODEL, RISK MANAGEMENT STRATEGIES, RISK MITIGATION, RISK NEUTRAL, RISK PROFILE, RISK PROFILES, RISK SHARING, RISK TRANSFER, RURAL FINANCE, RURAL FINANCE SECTOR, SAFETY, SAFETY NET, SAFETY NETS, SAVINGS, SETTLEMENT, SOCIAL SAFETY NETS, SOLVENCY, STOP LOSS REINSURANCE, SUPERVISORY AGENCY, SUPERVISORY FRAMEWORK, SUSTAINABILITY, TAX, TAXATION, TECHNICAL ASSISTANCE, TIMELY PAYMENT, TRANSACTION, TRANSACTION COSTS, TRANSPARENCY, UNDERWRITING, WEATHER EVENTS