Umeå University's logo

Index-based livestock insurance (IBLI) is promoted as a proactive measure to protect against climate-related risks. Despite initial efforts to introduce the insurance, its adoption has generally been low in most developing countries. This paper compares adopters and nonadopters of IBLI in four arid or semi-arid counties in Kenya, focusing specifically on household demographics, climate effects, land tenure arrangements, and the interaction between other coping strategies and the decision to adopt livestock insurance. The household survey was conducted in 12 counties, whereby 491 respondents were interviewed, of which about 4.5% had insurance. The results showed that IBLI adoption was influenced by the socioeconomic, environmental, and existing adoption strategies. Lack of awareness was the most common reason (44.2% of respondents) for not adopting insurance, showing the need for simplifying information, because the respondents with more schooling were likely to purchase insurance. High precipitation reduced the need for livestock insurance due to low drought risk. Active fodder management positively influenced insurance uptake, likely due to the use of the indemnity for investment in other adaptive strategies. Otherwise, pastoralists were more likely to purchase insurance if they had to travel a long distance to the alternative grazing grounds. Likewise, insurance premiums limited insurance uptake due to the imperfect correlation between drought and indemnity payments (basis risk). Generally, insurance alone is not a panacea for pastoralists. Presently, they seem to be too expensive compared to the value they provide. Either the prediction accuracy of IBLIs must be increased, or premiums more heavily subsidized, for insurance to be a genuine alternative for pastoralists.