India is exploring the implementation of a nationwide climate-linked insurance program to protect citizens from escalating extreme weather events. If successful, the country would become one of the first major global economies to roll out such a large-scale framework.
The climate-linked insurance scheme:
The scheme being considered is a parametric insurance model. This model differs from traditional insurance by paying out a predetermined amount when specific, verifiable weather thresholds are breached (e.g., rainfall exceeding a certain millimeter count or temperature spiking above a set degree for a week).
The insurance will cover financial losses due to major, high-frequency extreme weather events. To ensure resilience against mounting climate risks, the insurance will provide financial protection against the most frequent and economically damaging extreme weather events.
The following categories—heatwaves, floods and landslides, and severe storms and cyclones—represent the highest-impact hazards in terms of human casualties, economic losses, and displacement across India.
Heatwaves: Official records in 2024 reported 143 deaths and over 41,000 heatstroke cases, but studies estimate a single severe heatwave may cause up to 30,000 excess deaths, indicating massive underreporting. Economically, heat stress leads to a potential annual income loss of $141 billion due to reduced labor productivity.
Floods and Landslides: These are the deadliest climate disasters in India, accounting for nearly 75% of all extreme weather-related deaths over the past five decades. Between 1970 and 2019, they caused approximately $60 billion in damages and displaced over 32 million people from 2015 to 2024.
Storms and Cyclones: Cyclones historically caused 28.6% of total disaster deaths in India, though improved early warning systems have lowered recent casualties. Despite this, they remain highly destructive, causing about $22 billion in damages over 50 years, including $4.4 billion in losses from 2021 alone.
Climate finance at play?
To make the proposed climate disaster insurance scheme viable, the government is considering a mix of funding strategies. One approach involves reallocating portions of existing disaster relief funds, allowing the program to tap into resources already earmarked for emergency response. Another option on the table is introducing small, mandatory charges on utility bills—such as water or electricity—particularly in urban areas where collection mechanisms are already in place. Additionally, a consortium of insurance providers may be brought together to collectively underwrite the scheme, helping to distribute risk and ensure sustainability.
It is currently unclear whether this will be a completely new add-on scheme or if it will seek to synthesize or complement existing, more targeted policies like the crop-specific Pradhan Mantri Fasal Bima Yojana (PMFBY). Given the need to simplify and avoid duplication, a strategic effort to integrate it with, or position it as a financial backstop for, existing schemes is likely to be considered.
India is not the first country to implement climate-linked insurance:
India is not the first country in the world to implement a nationwide climate-linked insurance scheme, but it is poised to become the first major economy to do so.
Here are examples of countries and regions with significant climate-linked or universal insurance programs:
1. Fiji (PICAP Parametric Microinsurance):
Policy: Fiji became the first Pacific nation to introduce a sovereign, climate-linked insurance policy in 2021, providing coverage against events like tropical cyclones.
Impact: As per UNDF, in 2021, the pilot program covered 1,388 households in Fiji; about 32% of policyholders were women.
By the end of 2022, the scheme had scaled to cover 2,799 households across Fiji, Tonga, and Vanuatu, representing roughly 14,000 persons.
The target for Phase Two is to reach 5,000 households in Fiji, benefiting an estimated 25,000 individuals, including 2,000 social welfare recipients.
2. Gyeonggi Province, South Korea (Universal Provincial Scheme):
Policy: The Gyeonggi Province, which is the most populous province in South Korea, implemented a universal climate insurance policy that automatically covers all provincial residents (approximately 14.2 million people) for one year, with the premium fully subsidized by the provincial government. It specifically addresses health impacts and physical injuries from climate-related events like floods and heatwaves.
Impact: As per Asia Economy, within the first four months after the launch (April to August 2025), 2,358 payouts were made under the scheme; 1,945 (≈82%) of those were to climate‑vulnerable groups.
3. Caribbean Catastrophe Risk Insurance Facility (CCRIF):
Policy: CCRIF is a regional risk pool that allows member countries, primarily in the Caribbean and Central America (e.g., Barbados), to purchase parametric insurance policies against natural disasters like hurricanes, earthquakes, and excess rainfall.
Impact: Since its establishment in 2007, CCRIF has made 38 payouts totaling about $138.8 million to 13 member governments by 2018. These payouts have directly or indirectly benefited approximately 2.2 million people.
The single largest payout by CCRIF was ~$20.4 million to the Government of Haiti following Tropical Cyclone Matthew in 2016.
The way forward:
The government’s shift toward a parametric model moves India from a reactive crisis management approach (using relief funds after a disaster) to a proactive financial risk management approach.
The proposed nationwide climate-linked insurance scheme represents a fundamental, albeit still nascent, shift in India’s strategy to build financial resilience against climate change. However, the success of the project will hinge on the design of the premium structure and the political will to synthesize this universal protection with existing targeted subsidies.
