Background/Question/Methods There is growing concern that the current loss of biodiversity may negatively affect ecosystem functioning and stability. In the light of climate change, the response of ecosystems to perturbations, such as drought, is particularly important. Ecosystems may resist change in functioning under perturbation and/or show resilience by recovering to the original state after perturbation. The insurance hypothesis predicts that both resistance, recovery and resilience should decrease with biodiversity loss. The hypothesis is based on the assumption that species differ in their response to environmental change. Thus, as species richness decreases, the range of species responses will decrease. Consequently, more diverse communities have a lower chance of including a species that will increase its performance and compensate for other species in response to perturbation. Here, we test this hypothesis by analysing the effects of an extreme summer drought on community biomass in a long-term biodiversity experiment, which has shown that productivity increases with species richness. Results/Conclusions Resistance to drought decreased with diversity, but this pattern was highly dependent upon pre-drought performance. When corrected for initial biomass, no relationship between diversity and resistance was observed: at each level of diversity, biomass production was reduced by approximately 30%. In contrast, recovery (change in biomass production after drought) increased with diversity and was independent of pre-drought performance. This pattern appears to be driven by a diversity-dependent increase in performance after drought of a grass species. Interestingly, this increase did not affect the recovery of the other species. We conclude that it is this diversity-dependent recovery which allowed diverse, productive communities to reach the same level of resilience after one year as less diverse (and productive) communities. This finding provides strong experimental evidence for the insurance hypothesis.