Land degradation compromise drought risk financing across Africa, impacting pastoralist welfare

Drought and land degradation threaten pastoral livelihoods in Africa, particularly in the Horn of Africa (HoA), where livestock losses can undermine household resilience, local economies, and the effectiveness of climate-risk financing mechanisms. Index-Based Livestock Insurance (IBLI) offers an important means of reducing pastoral vulnerability by linking indemnity payouts to satellite-derived forage indices. However, its effectiveness depends on the assumption that vegetation-rainfall relationships and historical ecological baselines remain sufficiently stable over time. Increasing climate variability, land degradation, and other human-induced changes may violate these assumptions, creating basis risk and misaligned payouts for both pastoralists and insurers. We examine the implications of these changing environmental conditions for drought risk management and IBLI performance by integrating about 20 years of satellite-derived vegetation Indices (VIs) and precipitation data with linear and nonlinear modeling and Residual Trend (RESTREND) analysis. Across Africa, ~25% of the land area exhibits significant long-term changes in vegetation productivity, including 19% greening and 6% browning. Our analysis indicates that only 7% of these changes are primarily associated with rainfall variability, whereas 18% are linked to non-climatic factors such as agricultural expansion, bush encroachment, and invasives. These findings demonstrate that vegetation dynamics increasingly reflect interacting climatic, ecological, and anthropogenic processes, rather than rainfall variability alone. Consequently, drought indices based on historical vegetation-precipitation relationships may not adequately represent contemporary forage conditions or pastoral risk, with implications for the accuracy, equity, and financial sustainability of climate-risk financing systems. In IBLI operational regions within the HoA, ~20% of IBLI units (n = 124) exhibit significant changes in vegetation productivity that influence payout trends, highlighting the potential for changing ecological baselines to alter insurance performance and the correspondence between measured index risk and pastoralists’ realized exposure. The results suggest that environmental change can affect not only drought monitoring but also the distribution and reliability of climate-risk protection available to pastoral households. We therefore argue that robust drought-risk management in pastoral systems requires insurance and adaptation frameworks that account for land use/cover changes, shifting climatic baselines and degradation-sensitive vegetation dynamics, incorporate ground-based validation, and periodically reassess index-risk relationships. By linking long-term environmental change to insurance performance and pastoral vulnerability, this framework advances understanding of how ecological change can reshape risk measurement, climate-risk financing, and adaptation decision-making in drought-prone pastoral systems.