Context & Urgency
- India faced 764 major natural disasters since 1900, nearly half after 2000 – showing accelerating climate volatility.
- Between 2019–2023, India lost $56 billion to weather-related disasters — the highest in South Asia, ~25% of Asia-Pacific losses.
- Conventional indemnity-based insurance is slow, disputed, and inadequate for sudden climate shocks.
Relevance : GS 3(Disaster Management)
How Parametric Insurance Works
- Pays automatically when pre-defined weather thresholds are breached (e.g. <300 mm rainfall, >40°C, wind speed, seismic activity).
- Based on independently verified datasets from IMD, NASA-MERRA, satellite systems — ensuring objectivity.
- Eliminates the need for damage assessment, enabling rapid liquidity in crisis.
Implementation in India
- Nagaland (2024): First Indian state with multi-year parametric cover for landslides and extreme rainfall.
- Pilots in Rajasthan and U.P.: Protected women smallholder farmers against drought via water balance index.
- Jharkhand: Model proposed for microfinance-linked crop loan protection triggered by rainfall/temperature thresholds.
Global Relevance
- Successfully deployed in Africa, Pacific Islands, U.K. — for droughts, floods, cyclones, even livestock farming.
- Covers modern sectors like solar energy, where policies trigger payouts based on irradiance levels.
Infrastructure in Place
- India already has the climate data ecosystem, digital platforms, and State disaster mitigation funds to scale up.
- Early wins in agriculture, renewables, rural credit, and public disaster finance demonstrate viability.
What India Must Do Next
- Treat parametric insurance as critical climate infrastructure, akin to UPI in payments.
- Expand data networks, integrate into State Disaster Response, embed in climate finance architecture.
- Develop a scalable national framework — pre-approved triggers, digital disbursement, and legal-enforceability.
Strategic Advantages
- Offers speed, transparency, and resilience in an era of climate uncertainty.
- Helps preserve livelihoods, sustain credit cycles, and stabilize local economies during disasters.
- Can de-risk investments in climate-sensitive sectors and support climate adaptation finance under SDGs and Paris goals.
