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Index Based Livestock Insurance Scheme

Enkhtaivan G. CEO

AGRICULTURAL

REINSURANCE JSC

© CommNet 2013

Content

1. Introduction on Agricultural Reinsurance JSC

2. Index Based Livestock Insurance Scheme

3. Results on Index Based Livestock Insurance

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1. Introduction on Agricultural

Reinsurance JSC

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• In accordance to the “Index Based Livestock Law”,

Agricultural Reinsurance JSC has been established by

the Government of Mongolia’s order number 280 that

dated August 28, 2014.

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• The main purpose of the “Agricultural Reinsurance”

Joint Stock Company is to contribute to the

development of the insurance and financial sector

by providing with reinsurance service.

Purpose

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Goals

• Improve insurance system upon the protection of the herders’

livelihood from the Dzud risk.

• Be the base to develop reinsurance system in Mongolia.

• Be the leading company, which shapes a modern/contemporary

trend for reinsurance sector’s development in Mongolia.

• Strengthen the financial capacity of the domestic reinsurance sector.

• Operate to ensure the growth of company’s sustainable

development based upon the permanent existence on the insurance

market.

• Expand the international business relations and hold land-bridge

links between international reinsurers.

• Deliver a fast service for agricultural insurance products, which

fulfills customer’s needs within the short amount of time.

• Train highly skilled human resource for the insurance sector.

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Institutional Structure of the Company

Stakeholder Steering

Committee CEO

Asset Management and

Compensation Department

Business Development and

Project Department

Underwriting Department

Audit

Commission

Nominating

Committee

Remuneration

Committee

Ministry of

Finance

Deputy CEO

Internal Auditor

Secretary of

Steering Committee General Lawyer

Finance and Administration

Department

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Global Reinsurers

Participating Insurers

Reinsurance

Contract

Policyholders -

Herders

IBLI Policy Insurance Brokers

- Banks

Retrocession

Contract Retrocession Indemnity

Reinsurance Indemnity

IBLI Indemnity

Reinsurance Premium

Retrocession Premium

IBLI Premium

National

Statistical Office “Agricultural Reinsurance”

JSC Livestock

Mortality

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• Index based livestock insurance is protecting herders from

Dzud disaster which refers to index based and standard

insurance product.

• In other words, principle of this insurance has been developed

how the insured loss is determined based on indirect loss

indicator includes data regarding losses on the region and

factors that affect the loss.

• There is not any experience that index based livestock

insurance in the world. Thus index based livestock insurance

project has tentatively been implemented successfully since

2005, and has implemented in the whole of Mongolia since

2012. Therefore this project has been continuing under the

roof of the Agricultural Reinsurance JSC since 2015.

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Index based insurance is commercial product based on the market.

It has following features:

Insurance indemnity is paid to the herders by basing on the total

adult livestock mortality rate at Soum level for each types rather

than at livestock mortality rate of individual household in case of

exceeding thresholds sets by the government.

A herder could insure their livestock by market price

Premium rates are heterogeneity for each soum and each

species that depend on local feature

Threshold is 5 or 6% depends on historical mortality volumes for

each Aimags.

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Risk Layers

Mid-Layer Risk

/Participating insurers

and AgRe Mongolia/

Herders

Above Threshold

2 /25% or 30%

Mortality rate/

Threshold 1 to

Threshold 2

0-Threshold 1

/5% or 6%

Mortality rate/

Upper-Layer Risk

/Government of Mongolia

Thru AgRe Mongolia/

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Insurance Sales Season

2015

Apr Jun Jul Aug Dec Apr Jun Jul Aug Dec

2016

2016 Sales

Season

2017 Sales

Season

2016 Indemnity

payment

2017

Coverage

Period 2016 Coverage

Period

2015 Indemnity

payment

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2016 IBLI

Threshold

№ Aimag First

Threshold

Second

Threshold

Average Premium

Rate

1 Bayan-Ulgii 5 25 3.60

2 Dornogobi 5 25 2.60

3 Dornod 5 25 3.07

4 Selenge 5 25 2.43

5 Khovd 5 25 3.56

6 Orkhon 5 25 3.09

7 Darkhan-Uul 5 25 1.76

8 Gobisulber 5 25 3.22

9 Arkhangai 5 30 4.70

10 Bulgan 5 30 3.75

11 Sukhbaatar 5 30 4.18

12 Тuv 5 30 4.33

13 Khuvsgul 5 30 3.38

14 Khentii 5 30 3.68

15 Ulaanbaatar 5 30 4.07

16 Bayankhongor 6 30 6.72

17 Gobi-Altai 6 30 5.57

18 Dundgobi 6 30 4.83

19 Zavkhan 6 30 5.86

20 Uvurkhangai 6 30 5.64

21 Umnugobi 6 30 4.31

22 Uvs 6 30 4.70

Average 4.31

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The parliament of Mongolia has ratified the “Index based livestock

insurance law” on June 13, 2014.

This law is reflected in aspects of the following principles:

• Principles of insurance, threshold of mortality rate, determination of

insurance event, determine the level of risk, risk allocation, indemnity

payment;

• IBLI and reinsurance activities

• IBLI fund and its type

Background for Index Based Livestock Insurance Law

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3. Results on Index Based Livestock Insurance

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Number of Policyholders, 2006-2015 он

2,422 3,705 4,047

5,628 6,977

10,909

15,988

19,445

14,331

10,317

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

107.7 163.1 176.6 282.2

622.8

847.0

1,496.8

1,799.0

1,374.1 1,313.4

1.1

378.8 389.7

1,858.9

108.3 112.0 278.9

40.6 62.8

Premium volume /million.tugrugs/ Indemnity volume /million.tugrugs/

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