judgment to account for risk factors different than drought (Hoefsloot et al. 2013). In particular, as section III.2 showed, beneficiary numbers are subject to a detailed review process which can lead to changes in estimated beneficiary numbers. Given that historical beneficiary data are thus informed not only by current drought data but also by informed judgements, the LEAP tool is being extended to base beneficiary estimates on household livelihoods data (see section IV.2 below).

Due to the use of historic beneficiary numbers in computing needs, LEAP early warning information has so far not been used to inform insurance<sup>46</sup> . Upon the integration of household livelihood data to compute beneficiary numbers and hence elimination of subjective information in the computation of beneficiary numbers, the LEAP tool could serve as a basis for weather index insurance.

- (ii) **_Integration of market and price data:_** A further constraint of the LEAP tool in its current version is that the tool does not take into account market and price data. In particular, the ability of households to acquire food is determined not only by drought conditions (impacting on farmers’ ability to produce crops and livestock), but also by their ability to buy food in the market. Farmers’ ability to buy food is determined, for instance by the availability of food in the market, the distance of the household to the market, and food prices. To enhance the accuracy of beneficiary estimates obtained through the LEAP tool, the LEAP tool is being reviewed to include these variables.

- (iii) **_Integration of data for pastoral regions:_** Ethiopia is composed of a range of diverse livelihood zones, with livestock production representing a key source of income particularly in the regions of Afar, Borena and Somali. At present, the LEAP tool is centered mainly on developing beneficiary numbers for the crop seasons _meher_ and _belg_ . By integrating a pastoral index into the tool, LEAP could additionally generate beneficiary estimates for pastoral areas. GoE and WFP are currently in the process of extending the LEAP tool to integrate pastoral information.

- (iv) **_Flood monitoring:_** Additionally to drought, flood risks represent a major hazard in Ethiopia, with floods leading to average annual losses of US$ 200 million<sup>47</sup> . It is therefore envisaged that the LEAP tool could be enhanced by integrating a flood index, such that it could serve as a flood monitoring tool to generate beneficiary estimates for floods.

# IV.2 The LIAS tool

## _IV.2.1  The LIAS tool methodology_

The Livelihood Impact Analysis Sheet (LIAS) is an early warning tool that estimates beneficiary numbers based on the Household Economy Approach (HEA). LIAS was developed and collected initially through the Livelihood Integration Unit (LIU), which was established in 2006 as a USAID-funded project based in the former DPPA. The LIU was in operation until 2015, and was housed in the EWRD as part of DRMFSS. The objective of the LIU was to improve the accuracy and objectiveness of seasonal needs assessments in Ethiopia, by integrating an understanding of local livelihoods into the needs assessment process<sup>48</sup> .

> 46 At the micro-level, it is possible for LEAP data to be used to inform insurance. This would, however, require a detailed local-level index design process.

> 47 World Bank (2014b).

> 48 FDRE Disaster Risk Management & Food Security Sector, MoARD and USAID: The Livelihoods Integration Unit Uses of the Baseline Information and Analysis.

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