With less than 1,500 individuals left in the wild in Sabah, Bornean elephants (Elephas maximus borneesis) are under severe threat (currently listed as Endangered, IUCN Red List). Because of forest exploitation and conversion to other land-uses (notably oil palm plantations), the species faces habitat loss and fragmentation leading to increased human-elephant conflicts (HEC) with retaliation acts where local farmers poison or shoot elephants to protect their crops and belongings. Unofficial statistics in Sabah shows that up to 20 elephants may be killed every year as a result of HEC. Addressing HEC and pioneering community engagement in elephant conservation in Sabah has been a focus of the NGO Seratu Aatai which will lead this project.

To make sure elephants are able to survive in their wild habitat and enhance local support for elephant conservation in the State, Seratu Aatai has previously shown the need to increase people?s resilience to HEC and acceptance of agricultural losses. One venue that needs to be explored could be in the form of payments such as private insurance Such as an approach working with private insurance actuaries to design Livelihood Insurance From Elephants (LIFE), as it is used in Sri Lanka and Kenya with the support of the international think tank, the International Institute for Environment and Development (IIED) https://www.iied.org/covering-elephant-tracks-can-insurance-compensate-farmers-for-wildlife-damage . The work by Seratu Aatai in Sabah will be linked up to these LIFE programmes in Sri Lanka and Kenya to form the LIFE Sabah programme to promote mutual learning. Together this international consortium with Malaysian expertise and community participation will design and pilot test insurance for human elephant conflict in eight villages in Tongod District in order to scale up to a Sabah wide insurance scheme.

Human retaliation on wildlife arises when people feel threatened by animals or when wildlife destroys crops while villagers are unable to effectively mitigate these conflicts and prevent losses by employing traditional institutions and strategies to deal with the situation. Thus, reducing human?wildlife conflict (HWC) is key to peaceful coexistence between humans and wildlife.

One of the potential measures to mitigate HEC includes financially offsetting the costs of crop raiding and damages to properties via compensation or insurance. However, similar initiatives do not yet exist in Sabah or in Malaysia. Some other countries provide government-funded compensation to affected individuals, whilst other countries focus on private sector, insurance-based payments. The latter approach is the focus of this current proposal. If properly designed, insurance could give internal incentives to smallholders and community members to take efficient measures to reduce the probability of wildlife damages. In turn, this can reduce the economic burden of coexisting with wildlife, elephant in particular. It may help to make conservation program more acceptable to the community.

Below we detail how insurance will work, what data are needed to make it work, and how it relates to this project:

The first step is to understand exactly what risks are a problem and what type of coverage is required in any insurance program. So, we will need to research what types of coverage will add the most value to the smallholders, and what their other needs are for insurance. This coverage will need to be extremely specific, rather than something general such as ?elephant incursions?.

After this first step, we need to collect as much data as we can in order to get insurance companies comfortable with the risks they will be insuring. Things such as motor insurance or fire is well understood with plenty of data in Malaysia and globally. The elephant situation is different, with very little data available, even globally.

Thus, we will need to get information on the probability of each risk happening (or incidence risk). For instance, what is the probability of an elephant entering a smallholder?s land in one year? Assuming the elephant enters, what is the probability of each risk happening (pulling up young palm oil trees, damaging a car, injuring someone etc.). Estimating the incidence rate will require significant investigation and research during this project.

In addition to the incidence rate we also need to estimate the ?severity? of the problem, meaning: once an elephant comes into the property is the damage quite uniform or does it vary? Again, we need as much data as possible to understand the potential severity of the risk.

We also need to understand how to differentiate risks, as insurers need to know what/who are the good risks and the bad risks. For instance, perhaps a smallholder living along a river has a much higher chance of an incursion than a smallholder in a hilly area. This will be studied in this project.

An insurer will also want to know what risk mitigation techniques are possible, as paying an insurance premium is only one part of the story. For instance, if an insurer is insuring a commercial building, they will ask that sprinklers be installed and request for some other risk management strategies. Thus, the question for a smallholder would be, what can they be doing to reduce the risk of damage due to elephant incursions? The solution could be as simple as planting grasses that the elephants can feed on, or much more complex things such as electric fencing or wildlife corridors.

Finally, an insurer will want to know how much business is potentially available, for them to enter this type of business. This would be beyond the initial study area and extend to all of Sabah, Sarawak, and the rest of Malaysia.

Once this is done the insurers will need to be approached with the data that we have collected in the field and put together. Basically, either the insurer wants to take on the business, or the insurer is wary but open to the idea. For example, Africa Re, a reinsurer company working in Kenya on elephant insurance is willing to discuss with us (a reinsurer insurers an insurance company), so a Malaysian insurer can keep just a small part of the risk for themselves and the rest would be given to Africa Re. A final option is that if no solution can be found we work directly with Bank Negara to use their regulatory sandbox to design an innovative solution for the smallholders directly.

After the insurance solution is set, we need to convince the smallholders to purchase the insurance. If the insurance premium is only say 1% of the smallholders profits then this is an easy decision. However, if the premium is quite expensive then we need to find a way for the smallholder to increase his profits to make up for the profits lost due to insurance. This might be working with the mills to find ways for the smallholder to sell their goods at a higher rate (such as going organic or whatnot). With this set then the insurance program should continue long term.