Centre In Talks With Insurers To Launch Nationwide Climate-Linked Insurance Scheme

The Centre has begun early-stage consultations with domestic insurers to create a nationwide climate-linked insurance programme aimed at delivering faster and more predictable payouts after natural disasters, according to a Reuters report. The proposed plan is part of India’s broader effort to strengthen financial resilience amid the rising frequency of extreme weather events such as floods, heatwaves, and cyclones.

Parametric Insurance Model Under Discussion

Officials familiar with the matter said the new scheme will follow a parametric insurance framework, in which claims are automatically triggered when measurable weather indicators, such as rainfall, wind speed, or temperature, cross pre-defined thresholds. This differs from traditional insurance, where payouts occur only after extensive assessments of actual damages.

If implemented, India could become one of the first major economies to introduce such a nationwide system. The initiative is expected to significantly reduce delays in compensation, ensuring timely financial assistance to individuals, farmers, and small businesses affected by climate-related events.

Coordination Among Key Agencies

The discussions involve officials from the National Disaster Management Authority (NDMA), the Ministry of Finance, GIC Re, and several leading public and private sector insurers. According to the report, these agencies are assessing different models of coverage and financing mechanisms.

One option under review includes integrating the programme with existing disaster relief funds, while another considers the introduction of nominal levies on electricity or water bills to support premium collections. The move aims to reduce fiscal pressure on the central government, which currently provides post-disaster relief packages to affected states.

Global Momentum for Climate Insurance

Parametric insurance is gaining popularity globally as a mechanism for quick recovery after disasters. In 2023, Fiji became the first Pacific Island nation to introduce a sovereign parametric insurance policy covering tropical cyclones. Other countries in Asia, Africa, and Latin America are exploring similar models to bridge the gap between disaster occurrence and relief disbursement.

India’s growing exposure to climate volatility has intensified the need for such financial tools. The Germanwatch Global Climate Risk Index 2025 ranked India sixth among the world’s most climate-vulnerable nations. Between 1993 and 2022, India recorded more than 400 extreme weather events, which led to over 80,000 deaths and caused economic losses exceeding $180 billion.

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Conclusion

The proposed climate-linked insurance programme could represent a major shift in India’s disaster risk management strategy. By ensuring faster payouts, reducing fiscal burden, and improving preparedness, the initiative could help protect communities and businesses from the escalating financial impact of climate change. Early discussions mark a significant step towards a more resilient and responsive disaster financing framework.

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