Impact Insurance Research Paper #31: The impact of microinsurance on asset accumulation and human capital investments

Can insurance transfer risk in a way that reduces the need for households to rely on costly coping strategies that undermine their future productivity? That is the central question that Research Paper #31 aims to answer based on evidence from an index-based drought insurance product available to pastoralists in northern Kenya. Results show that insured households are on average 22-36 percentage points less likely to anticipate drawing down assets and 27-36 percentage points less likely to anticipate reducing meals than their uninsured counterpart. Insurance not only smooths consumption but also improves the ability of recovering after a drought.