The World Bank Tuesday approved a US$10 million scale up of the highly innovative Index Based Livestock Insurance Project (IBLIP) to help Mongolian herders.

IBLIP, which was first introduced in 2006, provides herders with insurance through partnering with local private insurance companies. Insurance protects herders from climate related losses to their livestock.

Managing risk in the livestock sector requires a combination of risk mitigation and financial approaches. Pastoral risk mitigation, including winter shelters, fodder crop storage and improved management of winter pastures, can help herders better prepare for moderate weather events.

This additional funding was approved following the success of the pilot project which is currently being implemented in four provinces in Mongolia.

With the new funding, IBLIP will now be expanded to additional areas, with the potential to reach all 21 provinces by 2012, according to the World Bank.

"Since IBLIP began, the technical viability of the insurance has been sufficiently demonstrated for a gradual scale up to be appropriate. The number of herders purchasing insurance has increased every year and local insurance firms remain committed to selling the product," said Andrew Goodland, Senior Agriculture Economist, Task Team Leader.

The insurance 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.

"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," said Arshad Sayed, Country Manager in the World Bank.

(Xinhua News Agency February 24, 2010)