Index Insurance for Forage, Pasture, and Rangeland: A Review of Developed (USA and Canada) and Developing (Kenya and Ethiopia) Countries

Simon Maina, Maryfrances Miller (), Gregory L. Torell, Niall Hanan, Julius Anchang and Njoki Kahiu
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Simon Maina: Department of Economics, Applied Statistics & International Business, Las Cruces, NM 88003, USA
Maryfrances Miller: Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM 88003, USA
Gregory L. Torell: Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM 88003, USA
Niall Hanan: Plant and Environmental Sciences, New Mexico State University, Las Cruces, NM 88003, USA
Julius Anchang: Plant and Environmental Sciences, New Mexico State University, Las Cruces, NM 88003, USA
Njoki Kahiu: Plant and Environmental Sciences, New Mexico State University, Las Cruces, NM 88003, USA

Sustainability, 2024, vol. 16, issue 9, 1-23

Abstract: Index insurance for forage, pasture, and rangeland has gained ground in policy and academic circles. Stakeholders promote it as an innovative risk management tool for enhancing resilience to drought-induced perils and providing a way for consumption smoothing to livestock producers in drought vulnerable ecosystems. Index insurance, which avoids market failures such as moral hazard, adverse selection, and transactional cost, has been piloted and implemented all over the world. To support future development and research on index-based insurance in livestock systems, operational index insurance for forage, pasture, and rangeland systems in developed (USA and Canada) and developing (Kenya and Ethiopia) countries are reviewed and compared. This paper finds some similar characteristics (huge subsidy payments—ranging from 50 to 100 percent, significant government role, low adoption, insufficient payouts, data challenges, etc.), of this product between the two regions. A major difference between the PRF and NDVI is the number of choices available to users of rainfall index insurance who face close to 3000 choice options, while NDVI users have less than 5 choice options available for them. Based on these insights, we highlight opportunities where the two regions can benchmark and improve upon their respective index insurance schemes—index-based livestock insurance (IBLI) in developing and rainfall index insurance for forage in developed regions.

Keywords: index; insurance; developing; developed; forage (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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