Neiphiu Rio,Chief Minister, Nagaland
Nagaland Chief Minister Neiphiu Rio said his government and SBI General Insurance inked an MoU on for Disaster Risk Transfer Parametric Insurance Solution (DRTPS), making Nagaland the first state in the country to implement a disaster risk management insurance solution
Kohima: North eastern state Nagaland has renewed its three- year parametric cover for disaster management with SBI General Insurance and supported by a clutch of reinsurers like Munich Re, SCOR Re, Hannover Re and GIC Re.
Among the reinsurers Munich Re, which has emerged as a leader in providing parametric cover in India, has taken the largest share in the deal.
Nagaland, which was the first state in the country to take a parametric cover in 2020 for disaster management, had earlier taken it from Tata AIG General Insurance and reinsurer Swiss Re.
Industry sources point out that the earlier cover had expired sometime back and the state government had floated a new tender and chose new set of re/insurers on the basis of lowest premium.
The earlier cover had no claims outgo.
Parametric insurance, also known as index-based insurance, is a type of insurance policy that pays a policyholder a set amount when a specific event occurs, rather than based on the amount of losses. The event is triggered when a predefined parameter is reached, such as a certain wind speed or rainfall level. The amount paid is based on the magnitude of the event, not the losses. Parametric insurance can be a good alternative to traditional indemnity coverage, especially in areas that are prone to natural disasters.
Earlier, Chief Minister Neiphiu Rio said his government and SBI General Insurance inked an MoU on for Disaster Risk Transfer Parametric Insurance Solution (DRTPS), making Nagaland the first state in the country to implement a disaster risk management insurance solution.
DRTPS will aid in protecting the state’s critical infrastructure and reduce economic losses due to a disaster, the chief minister said.
The Memorandum of Understanding between the state and re/insurers was signed for a period of three years with immediate effect. The signing of the MoU was held at the Chief Minister’s Office here between the officials of SBI General Insurance and the Nagaland State Disaster Management Authority (NSDMA).
The NSDMA will implement the Disaster Risk Transfer Parametric Insurance Solution over three years for the state.
“The state government and SBI General Insurance signed an MoU for DRTPS, making Nagaland the first Indian state to implement this disaster management insurance. A parametric multi-year risk transfer solution, it will aid in protecting the state’s critical infrastructure and reduce economic losses due to disaster,” said Rio on X, formerly Twitter.
The insurance covers the entire Nagaland, the CM said, adding that the government will pay the insurance premium and if a disaster happens, the insurer will come to the rescue for three years from 2024-2027.
“We hope that this will go smoothly and we will have the mechanism in all the districts to function properly with the help of the people as it is insuring all the citizens against flood, drought, mudslide, damage to properties and crops etc. Nagaland doesn’t have its own resources and if any disaster comes, this insurance will give us protection,” he said.
Without mentioning the premium amount, Rio said a mechanism would be worked out so that the state does not face a huge burden in paying premiums.
DRTPS is especially relevant in the context of an increase in extreme weather occurrences caused by climatic change, the NSDMA said.
The vision of the scheme is to provide financially resilient and safe livelihoods for sustainable development, it said.
It aims to establish an effective and efficient disaster risk management system in all districts of Nagaland and to facilitate community-based disaster risk management, the NSDMA added.
Parametric coverage is triggered by an independent third party using pre-defined data sources. Claims can be settled quickly and transparently, sometimes within weeks of the event Any covered economic loss can be indemnified Some common applications of parametric insurance include weather risks like drought, heavy rain, heat, frost, flood, and storm damage. For example, a policy might pay out 25%, 50%, or 100% of a pre-defined limit for a cyclone of a certain category, depending on the highest wind speed within a certain radius of the insured’s location.