The government's Economic Survey has suggested the use of climate insurance instruments to counter losses which the country faces each year due to extreme weather events.
The second volume of the Economic Survey 2016-17 notes that India suffers extreme weather losses of US$9-10 billion annually, of a significant part is uninsured, reported LiveMint.
The survey said innovative products supported by risk models and reinsurance pools can provide a huge opportunity to the insurance industry.
“One such model is that of Catastrophe Risk Pool (CRP) that aims to put the focus on proactive financial planning to deal with adverse impacts of natural disasters, instead of relying on fund-raising efforts after disasters, resulting in reduced economic losses as well as lowering the impact of disasters on the national budget,” the report said.
The Survey says that low insurance penetration in India was evident from data on recent calamities, a case in point being the 2014 Kashmir floods. While the total losses caused by unprecedented rains were in excess of INR1 trillion (US$15.6 billion), insurance companies were required to pay only around INR40 billion because of low insurance coverage.
In addition, while total losses from 2014’s Cyclone Hudhud reached $11 billion, insurers paid a bill of $650 million.
In India, climate-related insurance is limited to the agriculture sector, primarily in the form of crop insurance.
“We need to have a rational approach that balances environment, climate, economic development and energy security needs. We need to concentrate on cleaner forms of energy including cleaner coal, renewables and natural gas to fuel inclusive economic development,” the Survey also said.