The proposed model would adopt parametric insurance, which provides pre-determined payouts once specific weather thresholds — such as rainfall, temperature, or wind speed — are exceeded. Unlike traditional insurance, which requires detailed loss assessments that can take years, parametric models enable faster disbursement and can extend coverage to regions where conventional insurance products are limited.
If implemented, India could become one of the first major economies to establish a national climate parametric insurance scheme. The move may also help reduce government expenditure on disaster relief, as insurers would assume a greater share of climate-related risks. “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, former chairperson of state-run reinsurer GIC Re, who was involved in the early talks before retiring last week.
According to government sources, the National Disaster Management Authority, the finance ministry, and GIC Re are collaborating with top insurers to explore coverage structures and funding mechanisms. Although no formal proposal has been introduced yet, officials have confirmed that discussions are ongoing. The finance ministry, disaster management agency, and India’s insurance regulator (IRDAI) did not immediately respond to Reuters’ requests for comment.
Global Context and Precedents
Interest in parametric insurance has been increasing worldwide. In 2023, Fiji became the first Pacific Island nation to adopt a sovereign parametric policy for tropical cyclone coverage. Financial tools to mitigate climate risk are also expected to be a central topic at the upcoming COP30 summit in Brazil this November, under the United Nations Environment Programme’s finance initiative.
India’s Climate Vulnerability
India ranks sixth globally in climate vulnerability, according to the Germanwatch Global Climate Risk Index 2025, which analyzed events between 1993 and 2022. Over that period, the country experienced more than 400 extreme weather events, resulting in at least 80,000 deaths and an estimated $180 billion in economic losses.
Recent years have seen extensive damage across key agricultural regions, such as Punjab and Assam, due to flooding. Meanwhile, states like Uttarakhand and Jammu and Kashmir have faced flash floods and landslides that have destroyed infrastructure and homes.
Funding Considerations
The federal government is examining various financing options for the potential scheme. These include drawing from existing disaster relief funds or applying minimal charges to utility bills to fund premiums. One government official suggested that small deductions could be incorporated into municipal billing systems, allowing insurers to form consortia with local authorities to manage coverage.
State-Level Pilots and Initiatives
Several Indian states have already tested or initiated parametric insurance programs independently:
In 2024, a group of 50,000 self-employed women in Rajasthan, Gujarat, and Maharashtra received $5 payouts when temperatures exceeded 40°C between May 18 and May 25.
The northeastern state of Nagaland, which obtained disaster risk coverage from SBI General Insurance in 2024, received its first payout of $119,000 in May 2025 following excessive rainfall.
The Kerala Co-operative Milk Marketing Federation introduced a parametric plan to support cattle farmers facing losses from reduced milk production during extreme heat.
Industry executives report that these pilot efforts are encouraging wider discussions. “States are looking at a window for medium-term implementation. These conversations are gathering pace, and every insurance company is attentive to opportunities,” said a senior executive at a leading private insurer.
India’s exploration of a national parametric insurance framework reflects growing efforts to develop financial tools that provide faster, more predictable support for communities affected by climate change. While discussions remain at an early stage, both public and private stakeholders are signaling strong interest in advancing the initiative.
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