ZEP-RE aims to expand its World Bank-backed drought insurance to additional countries within the Horn of Africa, building on the product’s strong performance, which has exceeded demand targets in Ethiopia, Kenya and Somalia – where it was initially rolled out. The solution transfers drought risk from pastoralists to insurance companies, building climate resilience amongst the pastoral economies.
The regional reinsurer, appointed as the implementing agent of Component 1 of the De-Risking, Inclusion and Value Enhancement of Pastoral Economies (DRIVE) project since 2022, is preparing for talks with the World Bank to secure additional funding to onboard three more countries in East Africa, with plans to later expand to the Sahel region. The ultimate target is to make this a vital product for the continent to respond to climate shocks.
DRIVE Project Lead, Sylvia Mwangi, said in an interview with Africa Ahead, that the uptake of the cover in Ethiopia, Kenya and Somalia is significantly higher than what had been targeted. She sees room to expand this to Uganda, Tanzania and South Sudan and then further to the Sahel region that comprises about 10 economies including Nigeria and Senegal.
The project started in 2022, signing up 18,000 pastoralists in Kenya and Somalia during the Short Rains season between October and December 2022. Two years later, the number has grown to over 473,000 pastoralists drawn from Ethiopia, Kenya and Somalia, driven by increased demand.
According to the initial targets, the project was expected to hit 250,000 pastoralists by the end of five years. However, it has outstripped expectations by covering over 473,000 pastoralists within two years, derisking over $254-million.
“We are well above where we were meant to be,” said Sylvia. “We have a very good problem. It is a signal of demand, much higher than we anticipated. In 2022 we had a bad drought in the Horn of Africa, and we have benefited from a bit of experience, with pastoralists remembering how bad that year was.”
Sylvia says that while the funding for Kenya is sufficient, Somalia’s funding will run out by the end of this year and Ethiopia’s will be depleted by mid next year. The team is preparing to reach out to the World Bank for additional funding to support the project for the initially planned period of five years while also considering expansion within the Horn of Africa.
“If we want to be able to continue doing this for up to the end of the five years, we will require additional funding for us to respond to the needs of the community,” she said.
“Eventually, we can take what we have learned in the East to other parts of the Horn, including the Sahel region. We have engaged senior government officials and the World Bank, and I think there will be an appetite to start replicating the model.”
ZEP-RE team in October met the World Bank and Sahel governments in Washington DC on the sidelines of the World Bank annual meeting where the possibility of extending the DRIVE model to the Sahel region was explored.
“What that tells you is this should not be a five-year project. We want it to be more of a programme that becomes a way different partners support governments to respond to climate shocks, for vulnerable communities such as pastoralists and smallholder farmers,” said Sylvia.
“We now need to put together a proposition and see if we can get additional funding from the World Bank or even other partners as we look at broader disaster risks.”
The ZEP-RE team is also exploring the possibility of expanding climate risk coverage to include additional perils such as floods given the interplay between floods and droughts across the continent.
Gloria Karissa, DRIVE Actuarial and Insurance Lead, agrees with Sylvia that the project does offer a launch pad for a broader risk reduction programme across Africa based on the lessons learnt around packaging and distribution. She said given that it is the local insurance companies providing the underwriting capacity, they will be better positioned to underwrite climate-related risks as their expertise continues to grow.
At over 473,000 pastoralists, ZEP-RE estimates that the cover has impacted over three million people so far, assuming an average of 6.4 people per household. This impact shows how the programme is helping not just individuals, but entire communities, shield themselves from the financial burden of climate risks. It is more than just providing coverage—it is about creating a safety net that strengthens livelihoods and builds resilience, making a real difference for millions of people facing the unpredictability of climate change.
The insurance product is sold twice a year—before the commencement of the Short Rains and Long Rains which run from October to December and March to June respectively.
ZEP-RE data shows that in the first year, the cover reached 171,765 before growing further to 217,738 in the second year. Provisional data for the first season of the third year puts the figure at 83,535, taking the cumulative figure since the start to 473,038 pastoralists.
“We sell the insurance cover just before the commencement of each of the rainy seasons. In case the rains fail, we pay insurance claims for the pastoralists to buy water and food for the animals. The objective is to protect pastoralists against drought. That is why we anchor the cover around seasons,” said Sylvia.
DRIVE has so far collected $51.7-million in premiums from pastoralists, bringing the total sum insured to $254-million. The uptake points to market demand for the product, which has attracted over 30 private sector players, including 22 insurance firms, who are part of this growing network.
Kenya has attracted 18 firms comprising banks and insurers while Ethiopia and Somalia have each attracted seven. ZEP-RE data shows the project has paid out $18.72-million as bonus and $6.42-million as claims. The bonus is a one-time payment designed to incentivise pastoralists to take up the cover.
The DRIVE project seeks to strengthen support for pastoralists through access to rapid cash when there is drought—either through their savings or insurance payouts, allowing them to keep their core breeding stock alive.
The project incentivises pastoralists to save more in cash as opposed to increasing the size of their herd at a time the frequency and severity of drought has increased. Each pastoralist joining the program is required to have a savings account, through which they receive any payouts from the savings incentive or insurance policy.
“In the event of drought, there is a payout depending on the observed conditions across the three countries and also the various regions that we are covering. Each region is further clustered into unit areas of insurance depending on the risk profile of each area,” said Karissa.
Government subsidises the cover, with the subsidy levels varying per country. The subsidy is subject to a maximum of five tropical livestock units, which is equivalent to 5 cows, 50 sheep, 50 goats or 3.5 camels.
The DRIVE project extends to Djibouti, covering both drought and floods. In this case, the government fully pays for the cover and in the event of a drought or flood, they in turn receive the payout and utilise it to provide relief to the affected communities.
“In Ethiopia, Kenya and Somalia, it is a micro product and we deal directly with the beneficiaries. For Djibouti, it is a sovereign or macro product. What that means is that the government is using the premiums to buy the insurance so that when there is drought, we make the payout to the government,” explained Sylvia.
In Kenya, ZEP-RE started with four counties and has extended over time to the targeted 21. “We have seen a 26% repeat rate and this speaks to the appetite for the product as much as the subsidy level has been reducing,” said Karissa, adding that this points to the sustainability of the product.
Gloria, however, cautions that full withdrawal of the subsidy may affect affordability and reduce the pastoralists’ willingness to buy the cover.
She believes that while ZEP-RE is implementing the first component of the project, which is financial services for climate resilience, the overall sustainability of the project will be strengthened by the successful implementation of the second component, which deals with livestock value chain linkages and trade facilitation.
“Whether they can actively participate in livestock income-generating activities to sustain their livelihoods and also afford the insurance product as the subsidy reduces, is linked to the second component. So, in terms of sustainability, these two components need to work hand in hand,” she emphasised.
The Horn of Africa, which is among the most fragile regions in the world, is exposed to climate shocks with the recurrent severe droughts fuelling poverty and conflicts among pastoralists. This makes the insurance product a game-changer for them.
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