The Indian Government has launched interviews with local insurance companies in the design of the nationwide insurance program associated with climate, which aims to simplify the process of financial relief after extreme weather events such as floods and waves.
The proposed scheme is focused on the parametric insurance model in which the payouts can be made very quickly. It is also expected that this step will help manage its financial burden, because insurance companies would take more risks to which funds for disasters assistance are currently covered, Reuters reported.
India is the most prone to extreme weather events. If the proposed insurance system is approved, then it could make India one of the first major economies to introduce this program.
How does the parametric model work?
Unlike traditional insurance, where the demands are based on a detailed assessment of losses that can often take years, the parametric model is designed to ensure speed and feasibility.
In this model, the policyholders receive a predetermined payment when specific weather thresholds are violated. These thresholds could be specific levels of precipitation, temperature or wind speed.
Parametric insurance is particularly effective when offering coverage in rural and remote areas, where traditional insurance is often lacking and the assessment of loss is demanding.
Ramaswamy Narayanan, chairman of the GIC Recognition of GIC Re, told Reuters that the National Authority for the Management of the Disaster, the Ministry of Finance and GIC Re and other best insurance companies are currently investigating the possibilities of coverage and funding mechanisms.
Indian climate vulnerability
The pressure on the National Climate Insurance Program is critical due to the high susceptibility of India to climate risks. The national worldwide is placed in sixth place in climate vulnerability, based on the global climate risk index of the German Watch 2025.
In the last three decades, the leaders have seen more than 400 extreme weather events up to 2022, resulting in at least 80,000 deaths and estimating economic losses of around $ 180 billion.
States like Pandjab and Assam faced loss of crops and livelihoods due to floods, while lightning floods and landslides in Uttarakhand and Jammu and Kashmir destroyed houses and infrastructure.
Financing a project of insurance
The federal government supports this proposal, although a formal proposal is still in development. According to Reuters, it is considering several ways of financing premiums, including knocking on existing funds for assistance in disasters or collecting small charges for public services accounts.
Several states have already piloted parametric schemes and even more interviews with insurance companies to ensure greater coverage, the seven executives in the field of press agency said.
Last year, a group of 50,000 self -employed women in Rajasthan, Gujarat and Maharashtra received payouts of $ 5 when temperatures exceeded 40 ° C between 18 May and 25 May.
(Tagstotranslate) Insurance program associated with climate
