The Indian government has started early discussions with local insurers to design a national climate insurance program aimed at providing faster payments after extreme weather conditions such as floods and heat waves | Photocredit: Istockphoto
The Indian government started discussions at an early stage with local insurers about designing a national climate insurance program aimed at simplifying the payment process after extreme weather conditions such as heat waves and floods.
The schedule would accept a parametric insurance model, whereby policyholders receive a predetermined payment when specific weather thresholds such as rainfall, temperature or wind speed are violated.
Parametric model is considered
If the discussions bear fruit, India – among the nations that are most susceptible to extreme weather conditions – could become one of the first major economies to roll out such a program.
The move would also help the government, which now uses funds that are reserved for disasters to help states with unfavorable climate events, taking costs if insurers would take more risk.
Center, insurers in early conversations
“We have seen the frequency and seriousness of unfavorable climate events rise, and based on that this discussion started with the government,” Ramaswamy Narayanan, chairman of the reinsurers Gic Re, told Reuters.
According to a parametric model, payments can be made very quickly, while in traditional insurance payments are based on the continuing loss and assessments for years. Parametric insurance can also be used to offer coverage in areas where traditional insurance is rare.
The central government officials support the idea, although no formal proposal has been driven according to a government official. The official and a separate insurance leader, who both refused to be identified, also said the discussions are taking place.
The National Disaster Management Authority, The Finance Ministry and GIC RE and other top insurers are investigating coverage options and financing mechanisms, the official added.
The Ministry, the Disaster Management Agency and the Indian insurance policy ruler Irdai did not immediately respond to Reuters requests for comments.
Worldwide interest in increasing parametric insurance
The interest in parametric insurance is increasing worldwide. In 2023, for example, Fiji became the first Pacific Island Nation to assume a sovereign parametric insurance policy, which obtained coverage against tropical cyclones.
The use of financial instruments to reduce climate risk is also expected to be prominent at the COP30 Summit in Brazil in November, part of the Finance Initiative of the United Nations Environment Program.
Looking for coverage
India is in sixth place worldwide in climate vulnerability, according to the Germanwatch Global Climate Risk Index 2025, which followed events between 1993 and 2022.
During this period, India experienced more than 400 extreme weather conditions, which resulted in at least 80,000 deaths and economic losses of around $ 180 billion.
In recent years, important agricultural states such as Punjab and Assam have reported loss of crops and resources of existence as a result of flooding, while floods and landslides in Uttarakhand and Jammu and Kashmir have destroyed houses and bridges.
The central government is considering multiple financing options, including the ticking of existing disaster relief funds or levying small costs for accounts of utility companies to finance premiums, according to the government official.
“If it is in accordance with rules of urban local authorities, small deductions of utility accounts can be considered, with a consortium of insurers that enter into contracts with municipal companies,” the official added.
Separately of the discussions at the central level, some states have placed such schemes and even more are in conversation with insurers to secure parametric coverage, said seven industrial managers.
States that already control local models
Last year a group of 50,000 independent women in Rajasthan, Gujarat and Maharashtra Staten received $ 5 payouts when the temperature overestimated between 18 May and 25 May 40 ° C.
The small northeastern state of Navaland, which received the first coverage of India in 2024 in India from the SBI General Insurance, received its first payout of $ 119,000 in May after excessive rainfall earlier in the year.
The southern state of Kerala’s cooperative milk marketing federation also introduced a scheme to protect farmers against losses in the summer when higher temperatures lead to a reduced milk production.
“States are looking at a window for implementation in the medium term. These conversations collect pace and every insurance company is aware of opportunities,” said a senior executive with a leading private insurer.
Published on October 6, 2025
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