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  • Tue. Oct 7th, 2025

India Advances Talks on Nationwide Climate-Linked Insurance for Faster Disaster Payouts

India Advances Talks on Nationwide Climate-Linked Insurance for Faster Disaster Payouts

Representational image | Image:
ANI

The central government has begun early-stage talks with local insurers about designing a nationwide climate-linked insurance programme aimed at simplifying the payout process after extreme weather events such as heatwaves and floods.

The scheme would adopt a parametric insurance model, where policyholders receive a pre-determined payout when specific weather thresholds such as rainfall, temperature or windspeed are breached.

Should the discussions bear fruit, India – among the nations most prone to extreme weather events – could become one of the first major economies to roll out such a programme.

The move would also help the government, which now uses funds earmarked for disasters to help states with adverse climate events, rein in costs as insurers would be taking on more risk.

“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 retired last week but was part of the discussions.

Under a parametric model, payouts can be made very quickly, whereas in traditional insurance, payments are based on the loss sustained and assessments can take years. Parametric insurance can also be used to offer coverage in areas where traditional insurance is rare.

Federal government officials are backing the idea though no formal proposal has been floated yet, according to a government official. The official and a separate insurance executive, both of whom declined 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 exploring coverage options and funding mechanisms, the official added.

The ministry, the disaster management agency and India’s insurance regulator IRDAI did not immediately respond to Reuters requests for comment.

Interest in parametric insurance is on the rise globally. For instance, in 2023, Fiji became the first Pacific Island nation to adopt a sovereign parametric insurance policy, securing coverage against tropical cyclones.

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