Government launches Parametric & Hydro Insurance for disaster shield
ECONOMY & POLICY

Government launches Parametric & Hydro Insurance for disaster shield

GIC chairman Ramaswamy Narayanan announced that the government is actively developing parametric and hydroelectric insurance pools to enhance disaster protection. He stated that discussions are underway with regulators and insurers regarding these products.

According to Ramaswamy, the parametric cover will compensate based on predefined disaster triggers like earthquakes or storms. Meanwhile, the hydroelectric pool aims to safeguard power projects from losses caused by natural catastrophes. He referenced the successful post-2004 terrorism insurance pool as a model for these initiatives, emphasising their coverage against natural disasters such as floods and wind events.

Ramaswamy mentioned that the government intends to prioritise these schemes post-election. He conveyed, "The government is keen on acquiring this insurance cover for the entire country."

He further explained, "The regulator and stakeholders, including insurers and reinsurers, are actively participating in the process. The final product's name and structure will depend on its development."

Regarding the parametric cover, Ramaswamy clarified that discussions are ongoing about whether it will be procured at the state or district level. He noted the need to finalise finer details.

Insurers are exploring models from other regions that have been successfully implemented. Ramaswamy acknowledged the need for customisation, stating, "While certain models have shown promise elsewhere, our country's unique characteristics necessitate tailoring solutions to suit our needs."

He mentioned the insurance regulator's introduction of Bima Vistaar, a product offering property coverage up to Rs 0.2 million. Ramaswamy highlighted Nagaland's purchase of a parametric insurance policy in 2020, which provided cash payouts based on satellite observations and rain gauges to mitigate losses from excess rainfall.

Ramaswamy recounted the losses incurred during the Sikkim floods last year, particularly impacting hydropower plants. Although insurers settled a Rs 5 billion claim from Sikkim Urja Nigam, the total cover amounted to Rs 114 billion. He noted a cap of Rs 5 billion for Acts of God peril in the insurance cover, leading to the aforementioned settlement.

GIC chairman Ramaswamy Narayanan announced that the government is actively developing parametric and hydroelectric insurance pools to enhance disaster protection. He stated that discussions are underway with regulators and insurers regarding these products. According to Ramaswamy, the parametric cover will compensate based on predefined disaster triggers like earthquakes or storms. Meanwhile, the hydroelectric pool aims to safeguard power projects from losses caused by natural catastrophes. He referenced the successful post-2004 terrorism insurance pool as a model for these initiatives, emphasising their coverage against natural disasters such as floods and wind events. Ramaswamy mentioned that the government intends to prioritise these schemes post-election. He conveyed, The government is keen on acquiring this insurance cover for the entire country. He further explained, The regulator and stakeholders, including insurers and reinsurers, are actively participating in the process. The final product's name and structure will depend on its development. Regarding the parametric cover, Ramaswamy clarified that discussions are ongoing about whether it will be procured at the state or district level. He noted the need to finalise finer details. Insurers are exploring models from other regions that have been successfully implemented. Ramaswamy acknowledged the need for customisation, stating, While certain models have shown promise elsewhere, our country's unique characteristics necessitate tailoring solutions to suit our needs. He mentioned the insurance regulator's introduction of Bima Vistaar, a product offering property coverage up to Rs 0.2 million. Ramaswamy highlighted Nagaland's purchase of a parametric insurance policy in 2020, which provided cash payouts based on satellite observations and rain gauges to mitigate losses from excess rainfall. Ramaswamy recounted the losses incurred during the Sikkim floods last year, particularly impacting hydropower plants. Although insurers settled a Rs 5 billion claim from Sikkim Urja Nigam, the total cover amounted to Rs 114 billion. He noted a cap of Rs 5 billion for Acts of God peril in the insurance cover, leading to the aforementioned settlement.

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