across Mongolia. And while 2000 is the worst year in the 30 years of data,<sup>1969 isnearly</sup> as bad. Historical records also suggest that 1944 was more serious with mortality<sup>rates in</sup> excess of 30%. These losses would make a mortality index insurance<sup>programcostlyand</sup> require some risk sharing in the intemational capital markets. The report<sup>providesideas</sup> about how this might occur with both traditional reinsurance and the emerging<sup>weather</sup> markets.

The analysis also demonstrates that there are great differences in the<sup>relativerisk</sup> of livestock losses across Mongolia. On a standardized basis, the risk<sup>index thatwas</sup> created for all species suggest that 6 of 27 aimags have risk that are 3<sup>timesor more</sup> higher than the risk in the lowest set of aimags. This magnitude of differences speaks to the need to set different premium rates across Mongolia for any insurance<sup>program.Such</sup> information also raises serious concerns about the current proposals regarding<sup>mandatory</sup> insurance that would charge everyone the same premium rates. This<sup>ideaisflawedand</sup> would create the wrong incentives with transfers from those herders in<sup>lowriskareasto</sup> those in high-risk areas. Such transfers not only raise equity concerns,<sup>butalsowould</sup> create significant inefficiencies. The report also discusses why mandatory<sup>individual</sup> insurance would run counter to the goal of improving risk mitigation strategies<sup>among</sup> herders.

At this stage, there are a number of additional items that<sup>wouldneedattentionas</sup> first steps in designing a pilot project to test the feasibility and acceptability<sup>of mortality</sup> index insurance. Some basic considerations and next steps follow:

1. **Collect data on mortality and adult livestock numbers for more**<sup>**sum;**make</sup> certain that these data are complete for all species of livestock<sup>foratleast30</sup> years; create a data set for as many sum as possible but, at a minimum,<sup>obtaina</sup> geographic spread of sum within a aimag and complete at<sup>leastfive sum foreach</sup> aimag.

2. **Investigate in some detail the statistical system that is being used**<sup>**todevelop**</sup> **the census of animals and the reporting of mortality of**<sup>**animals.**</sup> This investigation should be conducted with a clear picture of<sup>howthese datamight be</sup> used to make insurance payments. A number of issues should be<sup>investigated:1)</sup> what is the quality of these data? 2) Could the data be developed<sup>at thebag level?</sup> 3) Has the process for developing the data changed in any significant<sup>fashionin</sup> the last 30 years? 4) Have the data been used in the past to make<sup>emergency</sup> disaster payments and, if so, is there any evidence<sup>thatthiscreatedany</sup> misrepresentation in the data? 5) Given that a census is taken every<sup>year,arethere</sup> adequate safeguards and accounting systems in place to<sup>mitigatetheopportunity</sup> for manipulating the data? 6) What auditing systems might<sup>be addedto assurethat</sup> the data process does not change when a insurance payments<sup>arebeingmadeon</sup> the basis of the data? 7) How do herders and others view the quality<sup>of thedata?</sup> 3. **Select a sample of sum to offer the mortality index**<sup>**insurance.**Initially,the</sup> government could collaborate with the private insurers and make insurance<sup>offers</sup> in a select sample of sum. The sample should be selected<sup>withsome geographical</sup> spread in mind. Ideally, the offers would be made in about 30 sum.<sup>Giventhat</sup>