Insuring against droughts: addressing issues of trust, transparency and liquidity in the demand for livestock index insurance

Pastoralists in sub-Saharan Africa are particularly vulnerable to changing climatic conditions and heavily affected by an increasing frequency of severe droughts. To increase drought resilience, livestock index insurance constitutes a promising tool that is aligned mitigate covariate risks. Uptake rates for these products are, however, relatively low. This article uses choice-experimental data collected Northern Kenya analyse preferences hypothetical contracts among pastoralists. Results show pastoralists prefer lower strike levels as well transparency the form regular radio announcements text messages informing policyholder about location-specific readings. Highly valued trust enhancing features such certification. We do not find any indication option split premium payment into two instalments way relax potential liquidity constraints could lead higher demand.