Commercially sustainable
The International Livestock Research Institute (ILRI) says satellite imagery will be used to monitor the landscape - if the images show a lack of pasture then it will be assumed the animals are likely to die and the owners can receive a pay-out.
ILRI's Andrew Mude told the BBC that they had spent four years on the project and wanted it to be commercially sustainable.
A new insurance scheme has been launched in northern Kenya which offers herdsmen a chance to protect their livestock against drought.
The initiative uses satellite technology to check the pasture available for the herders.
Arid northern Kenya suffered a severe drought last year and hundreds of thousands of animals died.
Until now insuring herds of livestock in rural Africa has been all but impossible.
Partly because it has simply been too expensive for insurers to go and count the number of dead animals which might be spread over a vast rural area.
But a new initiative launched in Marsabit in northern Kenya offers some hope at a time when frequent droughts are hitting communities hard.
