The World Bank has approved a USD10 million scale-up of the Index Based Livestock Insurance Project (IBLIP) in Mongolia. IBLIP was introduced in 2006 and provides herders with insurance to get protection against climate-related losses to livestock.

This additional funding was approved following the success of the pilot project which is currently being implemented in four provinces. With the new funding, IBLIP will now be expanded, with the potential to reach all 21 provinces by 2012.

“The number of herders purchasing insurance has increased every year and local insurance firms remain committed to selling the product.” Andrew Goodland, Senior Agriculture Economist and the Task Team Leader, has said.

Managing risk in the livestock sector requires a combination of pastoral risk mitigation and financial approaches. Pastoral and herd management must therefore be complemented by financial mechanisms that provide herder households with immediate liquidity after a disaster.

The program is a combination of self-insurance, market based insurance and a social safety net. Herders bear the cost of small losses that do not affect the viability of their business, larger losses are transferred to the private insurance industry. Only the final layer of catastrophic losses is borne by the Government.

"The scale up will enable the Government of Mongolia to support herders in a way that is market-oriented. At the same time it allows herders to focus on the quality of their livestock, instead of quantity, by not having to worry about keeping large herds as a way of protecting themselves from losses," Goodland added.

World Bank Country Manager Arshad Sayed said, “World Bank support for IBLIP should help place this project on a sustainable path for the future, and serve both Government and herders in providing a valuable tool to manage climatic risks.

IBLIP is co-financed by the Japanese Government and the Swiss Agency for Development and Cooperation. A grant from the Korean Government is also pending.