India’s central government is in the initial phase of discussions with domestic insurers to establish a nationwide insurance programme designed to respond to climate-related disasters.
According to an exclusive report by Reuters, the proposed scheme would use a parametric insurance model, which pays out predetermined amounts when weather indicators such as rainfall, temperature, or wind speed reach specified levels.
This approach is intended to accelerate compensation to policyholders after events like floods and heatwaves, bypassing the lengthy claims assessments associated with traditional insurance.
A senior government official, who requested anonymity, confirmed that the National Disaster Management Authority, the Ministry of Finance, GIC Re, and other major insurers are exploring potential structures and funding mechanisms for the scheme.
“We’ve seen the frequency and severity of adverse climate events go up, and based on that, this discussion with the government also started,” said Ramaswamy Narayanan, who recently retired as chairperson of GIC Re and was involved in the talks, as reported by Reuters.
India’s vulnerability to climate events is among the highest globally, ranking sixth according to the Germanwatch Global Climate Risk Index 2025.
Over the past three decades, the country has experienced more than 400 extreme weather incidents, resulting in significant loss of life and economic damage.
States such as Punjab and Assam have reported agricultural and livelihood losses due to floods, while regions like Uttarakhand and Jammu and Kashmir have faced infrastructure damage from landslides and flash floods.
To finance the proposed insurance scheme, the government is considering options such as reallocating disaster relief funds or introducing minor surcharges on utility bills to cover premiums.
“If it aligns with rules of urban local bodies, tiny deductions from utility bills could be considered, with a consortium of insurers entering contracts with municipal corporations,” the official told Reuters.
Several Indian states have already piloted parametric insurance products.
In 2024, Nagaland received a payout of US$119,000 from SBI General Insurance after excessive rainfall triggered the policy.
In another example, 50,000 self-employed women in Rajasthan, Gujarat, and Maharashtra received US$5 payouts when high temperatures were recorded in May last year.
Kerala’s co-operative milk federation has also introduced insurance for cattle farmers to offset losses from reduced milk production during heatwaves.
The move comes as global insured losses from natural catastrophes continue to rise. Willis’ latest review projects that insured losses from disasters in 2025 will again exceed $100 billion worldwide, marking the seventh consecutive year at this level.
Verisk’s recent Global Modelled Catastrophe Losses Report estimates the average annual insured property loss from natural disasters at $152 billion. The report attributes this increase to factors like inflation, urban expansion, more frequent severe weather, and climate change.
In Asia, the protection gap remains wide, with insurance covering only a small portion of total economic losses.
