Agricultural Risk Transfer

CHAPTER 7Livestock Insurance

7.1 INTRODUCTION

Livestock is an important agricultural sector as it contributes 30–40% of the global agricultural GDP and over 1.3 billion people directly depend on livestock for their livelihoods, including some 600 million poor farmers. While industrialised operations produce to satisfy the increasing demand for meat and dairy products, traditional livestock systems contribute to the livelihoods of 70% of the world's rural poor. Although impressive growth rates in production have been achieved in the past decades through specialisation, verticalisation and global trade, the sector is becoming increasingly vulnerable to unexpected production shocks (e.g. through outbreaks of epidemic diseases) and climate change. Insurance remains the main risk management approach for production risks and has been supporting the growth of livestock production in many markets through indemnity- and index-based products.

This chapter first provides an overview of livestock production systems and discusses trends in supply and demand of livestock products. It then gives an overview of the main risk transfer solutions, with a discussion of standard livestock insurance (SLI), extended livestock insurance, including epidemic disease insurance and consequential loss covers, index-based covers and revenue insurance.

7.2 SECTOR TRENDS

In the past two decades, increasing demand for livestock products has been met through a shift from extensive, small-scale, subsistence, ...