Parametric insurance may help protect farmers against conflict: study

By Henry Gale

Feb 10 - (The Insurer) - Being covered by parametric drought insurance could reduce livestock farmers' risk of being exposed to violent conflict, a recent study has suggested.

The authors of the paper, which focused on pastoralists in southern Ethiopia, say it demonstrates that the link between weather shocks and increased conflict risk is reduced by up to 50 percent for those covered by parametric insurance.

It was written by the German Institute of Development and Sustanability's Tekalign Gutu Sakketa, and Dan Maggio and John McPeak from Rutgers and Syracuse universities respectively, and published in the Journal of Development Economics.

With other studies showing that drought events can increase the risk of conflict and some suggesting that social protection schemes can weaken this link, the paper examined whether households insured through parametric programs were less likely to be exposed to violent conflict.

It cited several factors that could explain a causal relationship between insurance uptake and lower conflict risk. For example, prompt payouts could prevent households from falling into poverty after a drought. Insured farmers could also face less pressure to migrate livestock further from their home community during a drought, making friction with neighbouring communities less likely.

"Depending on the measure of conflict considered, we find that IBLI [index-based livestock insurance] uptake has the potential to reduce approximately between 25 and 50 percent of the total effects of drought shocks on conflict exposure," the study said.

While the paper's authors noted several limitations based on the available data and reporting of local conflict events, they observed that the study's conclusions were similar to a 2023 study in Kenya, which looked at the link between insurance uptake and conflict on an administrative region level (the Ethiopia study used data about individual farming households).

The study concluded: "IBLI has been developed and widely promoted in southern Ethiopia to protect pastoral households from drought impacts based on satellite readings of the rangelands. At the same time, this paper has shown that IBLI can act as a protective factor against conflict and potentially attenuate the weather-conflict link.

"In this way, our findings justify allocating spending earmarked for peace-keeping toward establishing social protection programs in areas with complex conflict-weather risk profiles."