MR Microinsurance_2012_03_29.indd - International Labour ...

260 General insurance
Depending on the context, other risks are also important. Heffernan et al.
(2003) conducted a survey of 3 000 households across Bolivia, India and Kenya
and found that livestock diseases are the most significant problem for approximately
20 per cent of all producers. Others (Perry et al., 2003; Pica-Ciamarra,
2005) have argued that in low-income countries across Africa, Asia and Latin
America animal diseases are a major factor in limiting meat and milk production
and depressing livestock incomes. Moreover, for a majority of livestock livelihoods,
especially in semi-arid areas, climate-related shocks that result in water
and fodder scarcity constitute the most significant risk. Most of the production
systems the poor engage in – agro-pastoral, pastoral and smallholder crop-livestock
systems – are rain-fed, with severe shortfalls often resulting in productivityreducing
morbidity and, in many cases, widespread mortality.
The initial consequence of the growing water and fodder scarcity is a reduction
in lactation rates, which lowers daily income. The calving frequency of
weakened animals is also likely to be adversely affected, with consequences for
the expected income stream from a future herd. In addition, emaciated livestock
have impaired immune systems and are more likely to succumb to diseases, further
perpetuating the cycle of morbidity. In extreme cases, severe shortages of
water and forage lead to mortality.
Uninsured risks, particularly for valued productive assets, leave poor households
exposed to serious losses from negative shocks. The welfare costs due to
forgone investment opportunities and ineffective coping methods are considerable
(Dercon, 2005; Dercon et al., 2005; Barrett et al., 2006; Carter and Barrett,
2006).
Mortality due to the key sources of vulnerability – starvation and disease –
has generally been the most amenable to insurance, and comprises the set of risks
that a majority of livestock insurance programmes cover. However, not all risks
are insurable, and therefore it is important to build an overall risk management
strategy that also includes reducing risk through preventive measures such as better
feeding, vaccination, breeding and de-worming.
12.2 Livestock insurance provision to the poor
In the few examples of livestock insurance schemes in developing countries, governments
and the public sector have often been the pioneers. As an extension of
the agricultural support that governments may provide, including the guarantee
of minimum prices for agricultural commodities, re-financing, extension services
and subsidies for inputs, insurance covering the inherent risks of agricultural
production is a complementary method to boost agricultural production and the
economic welfare of rural households.