# **_2.3. Policy Implications: Toward a Public-Private Partnership_**

Governments, with the help of international institutions like the World Bank, can create an economic and legal environment that facilitates the emergence of a competitive insurance market and provides farmers with incentives to engage in risk financing strategies. This should rely on a public-private partnership between the government and the domestic insurance industry to address the following challenges:

- _Data management_ . An efficient data management system is critical to the development of insurance products. It aims to (i) build accurate and complete historic databases and (ii) secure future data measurements from fraud and abuse.

- _Regulatory and supervisory framework._ This framework is intended to ensure that (i) insurers have the financial resources required to pay all claims as they become due and (ii) insurers treat consumers in an equitable manner in all financial dealings. It is based on a set of rules that foster financial sector stability and public protection, while ensuring market competitiveness and efficiency.

- _Technical expertise._ Agricultural insurance is a very technical field. At the top administrative level, it requires expertise in the design of the insurance scheme, the establishment of the terms and conditions of coverage, and the actuarial aspects of insurance. At the local level, there is a need for personnel who can explain agricultural insurance to the farmers and for personnel skilled in the functions of underwriting and loss adjustment.

- _Risk financing entity._ Governments should only finance losses that cannot be transferred to the private market at acceptable costs. They should focus on catastrophic losses, acting as reinsurers/lenders of last resort, when the financial resources of the domestic insurance industry are scarce and the access to international reinsurance markets is limited. This temporary risk arrangement should allow insurance companies to build up reserves and to retain larger layers of risk over time. The resulting risk exposure of governments should be adequately financed through an appropriate country risk financing strategy including, e.g., reserve funds, reinsurance and contingent credit facilities.

- _Information and education_ . Information and education campaigns should be undertaken to reduce the widespread lack of insurance culture among farmers.

# **3. Livestock Mortality in Mongolia**

# **_3.1. Mongolian Livestock Sector_**

The agricultural sector plays a central role in the Mongolian economy, contributing around onethird of national GDP. The most important agricultural activity is livestock husbandry, which has over an 80 percent share of agricultural GDP and supports at least half the population. Livestock provides an important source of income, jobs and food security, and a means for households to invest and store their wealth. However, the country is prone to regular extreme climatic events that can cause high rates of livestock mortality, jeopardizing rural livelihoods. In particular, the frequent droughts and severe winters (known as _dzuds_ ) can devastate herds. During the period between 1999 and 2002, one-third of the national herd was lost in successive _dzuds_ .

The importance of livestock to the livelihoods of poor rural households has increased in recent years with the shift from collectivized farming to family-based herding during the 1990s. As a result of economic restructuring, the number of herding families doubled from 1990-1997, and 9