Parametric Insurance: Can it provide the financial safety net India needs against climate risks?
Between 2000 and 2019, India experienced the third-highest number of natural disaster events globally. The future looks grim as the frequency and intensity of these disasters are projected to increase, causing losses and damages running into billions of U.S. dollars. Traditional government funds may not be enough to cover these costs, highlighting the need for innovative financial solutions. One such novel tool India is cautiously experimenting with is parametric insurance. Unlike conventional insurance schemes, which rely on indemnity and post-disaster loss evaluations, parametric insurance operates on predefined parameters that, when met, trigger immediate payouts. This approach is particularly crucial in a country like India, which experiences natural disasters quite frequently. According to a report by the Centre for Science and Environment, India encountered weather-related disasters almost daily in the first nine months of 2022 alone. Between 2019 and 2023, these disasters led to damages worth $56 billion.
