index-based insurance product to indemnify herders based on the
mortality rate of adult animals in a given area was recommended. The
index-based livestock insurance (IBLI) policy pays indemnities whenever
the adult mortality rate exceeds a specific threshold for a localized
The proposed insurance program… combines self-insurance,
market-based insurance and social insurance. Herders retain small
losses that do not affect the viability of their business, while larger
losses are transferred to the private insurance industry and only the
final layer of catastrophic losses is borne by the government.
Note that this is a version of Robert Shiller’s livelihood insurance which would insure people based not on their income but on an index of income in their profession. Livelihood insurance would be a form of private unemployment insurance not subject to problems of moral hazard.