# **_6.1. Statistics Used to Measure Livestock Mortality_**

The GoM has been conducting an annual census of animals in Mongolia for well over 50 years. The procedures are well-established and have numerous laws that attempt to protect the integrity of the process. Nonetheless, there are potential problems with these data once an insurance product is developed to pay based on the mortality rates. Considerable effort was made to understand the data process during the development of the pilot. It was learned that approximately 90 percent of the losses occur while herders are in their winter camps. Even though herders move their animals and can cross _soum_ boundaries, it was also learned that where they have their winter camp is the designated _soum_ in the census. Herders typically have a pattern of keeping their animals in the same camps by season. Local government leaders know the families and know their animals. These experts are used to assist in counting and reporting problems. New systems to track the same families will be developed at the National Statistics Office (NSO).

To assure a timely payment, a new animal census will be conducted during the pilot stage during the month of May. Mortality rates of adult animals will be based on the Census at the end of December and the May Census. There are very few animals slaughtered during this period. Thus, this statistic should reflect actual mortality better than numbers that would extend into the heavy slaughtering periods. During the pilot, the traditional methods of reporting mortality and a sample survey will be used to monitor any emerging problems. Additionally, a special technical assistance program is to be provided by the U.S. Department of Agriculture Statistics Service. This assistance will be targeted at a lower cost and more accurate procedure that will use sample survey techniques. At the end of the pilot, an evaluation will be made about the sustainability and reliability of alternative methods for estimating mortality rates.

# **_6.2. Basis Risk for Individual Herders_**

Basis risk will be an issue for some herders. Undoubtedly some herders will have losses when the mortality rate does not trigger a payment. To the extent that these losses are not severe when the insured herder does not get a payment or receives too little payment from the BIP or the DRP, the concept of self-retention is still important. However, there are potential problems if there are large losses. Other risk coping mechanisms need to be enhanced. Given that index insurance should take the major risk out of the system, it can also allow groups of herders to share risk in more creative ways. The project will attempt to link the index insurance to microfinance and to herder self-help groups that could facilitate informal risk sharing mechanisms within the group.

A relatively straightforward examination of the data confirms that the spatial relationships among contiguous _soums_ are relatively high. The three worst years in recent history, 2000, 2001 and 2002 for three _aimags_ , Khentii, Bayankhongor, and Uvs were examined to make this determination. The average mortality rate for each species for each _aimag_ was calculated from the _soum_ mortality rates for a given year. Then the deviation from the mean was calculated for each _soum_ as follows: Deviation by _soum_ = ( _Soum_ mortality rate - average _aimag_ mortality rate) Positive values indicate above average mortality rates for that _soum_ , while negative values indicate below average mortality rates. These values were then mapped to get a visual representation of the geographic distribution of livestock deaths by species and _soum_ . While there will be always be variation at the local level, the images indicate that the severity of the disaster is graduated, meaning the highest mortality rates are concentrated in several _soums_ and decrease as you move further from that area. Though the index will be based on _soum_ -level losses, the graduation of losses across _soums_ indicates an event where there are correlated losses. This also is likely to be true within the _soum_ . The higher the correlation of losses across an area, the more the 25