L to-R-Hitesh Kotak, Chief Executive, Japan, India, Korea, and South-East Asia at Munich Re,Krishna S Vatsa, Member, NDMA,Safi Ahsan Rizvi, Advisor (Mitigation), NDMA, M Nagaraju, Secretary, Department of Finance (DFS), Mandakini Balodhi, Director(Insurance), DFS,Surbhi Goel, CEO, Munich Re India Branch at an event on “Disaster Risk Transfer and Financing Solutions for India,” in New Delhi organised by Munich Re
“ We are trying to reach out to states to get their inputs in developing a suitable financing mechanism disaster financing. There will be a Task Force soon consisting of officials from National Disaster Management Authority(NDMA), DFS to chart out action plans including setting up a viable funds for disaster financing for vulnerable communities,’’ informed MP Tangirala, additional secretary, Department of Financial Services
New Delhi: The government is now pushing State Governments, re/insurers and other stake holders in the Indian economy to overhaul their disaster management strategies and focus on new ways of disaster risk `transfer and financing solutions to manage increasingly larger losses from rising incidence of catastrophic events in the country.
M Nagaraju, Secretary, Department of Finance (DFS), has urged Indian re/insurers to bring in the best global solutions to manage natural disasters in the country.
“ India is prone to rising incidence of natural disasters. Currently, whenever natural disasters happen in the country, mostly the government pays for the compensation. We need to replace government compensation with insurance for immediate payouts,’’ he said while inaugurating a recent first ever a day-long event on “Disaster Risk Transfer and Financing Solutions for India,” in New Delhi organised by Munich Re, the largest global reinsurer.
Natural disasters damage crops, impact lives, livelihood and affect other national infrastructure projects. In all these cases, accessible and innovative insurance products can be explored by the Indian re/insurers, that can provide a safety net for those most affected by natural disasters, helping them recover and rebuild with dignity, emphasised Nagaraju.
Though, the Indian insurance sector has been opened up and foreign direct investment is allowed, India is much behind other countries in insurance penetration, which needs to be changed. Both the government and the regulator IRDAI are working to improve the situation in the sector, added DFS secretary.
Nagaraju talked about his first hand experience in dealing with natural disasters in North Eastern states and hailed Nagaland for designing adopting the country’s first ever parametric insurance cover to manage losses out of the natural disasters.
He suggested other North East states, Odisha, West Bengal and Southern states should also avail parametric covers to manage their rising losses out of natural disasters.
“ Equally important is our commitment to empowering the most vulnerable communities. Financial preparedness is not just a technical solution but a social responsibility,’’ he added.
In 2023, India recorded nine large natural disasters, including floods, Glof (glacial lake outburst flood), cycles. As per re/insurance market discussions and various public sources, these disasters have caused over $ five billion in economic losses and close to $ 900 million of insured losses.
Also, studies have shown, states have been cutting down on expenditure, over the years, for providing relief to people affected by natural calamities .
Participating in the event, MP Tangirala, additional secretary , DFS, revealed that the government is trying develop a vision statement and Road map by 2030 on disaster financing in the country.
“A Task force needs to be formed with timelines to create a framework for achieving the goal of Disaster risk transfer and financing solution. There will be a task force soon consisting of officials from National Disaster Management Authority(NDMA), DFS to chart out action plans including setting up a viable funds for disaster financing for vulnerable communities,’’ informed Tangirala.
MP Tangirala, additional secretary , Department of Financial Services
“We need to de-clutter the entire scenario of disaster financing. We need to have both standardised policy and flexibility to tackle disasters and disaster financing in the country. We are trying to reach out to states to get their inputs in developing a suitable financing mechanism in disaster financing. We have to educate all stakeholders with necessary information and possible products,’’ underlined Tangirala.
Giving valedictory address Prashant K Goyal, joint secretary, DFS, said insurance companies and states need to come together to build new insurance products for catering to different geographical conditions as frequency of natural catastrophe are rising in the country.
“Considering the increased frequency and severity of catastrophic disasters, the priority of union government and state governments should be an immediate relief to the public and we need to have a state level insurance cover customised to their vulnerabilities and financial budget,’’ underscored Goyal.
Prashant K Goyal, joint secretary, DFS
In this regard, Goyal suggested that the insurance companies need to initiate dialogue with the state governments to work on suitable products and central government needs to nudge state governments to make use of these products.
“Disaster funds should be treated as capital expenditure instead of revenue expenditure. We have a situation where post disaster the people can’t produce documents to avail immediate relief ’’ he observed.
Johnny Ruangmei, Joint CEO, Nagaland State Disaster Management Authority (NSDMA) proposed in line with other segments like Health(Pradhan Mantri Jan Arogya Yojana (PM-JAY)) and Crop(Pradhan Mantri Fasal Bima Yojana), the central government should develop and launch Pradhan Mantri Daiveey Aapada Suraksha Scheme (PM-DASS) with a comprehensive Disaster Risk Management National Flagship program.
“This program will aim to address components of disaster risk reduction and climate risk such as preparedness, mitigation, response and recovery including risk reserve pool, with the objective to provide a comprehensive risk transfer solution. This could serve as special purpose vehicle as well as a risk pool,’’ suggested Ruangmei.
L to R-Ankur Gupta, Munich Re, Krishna S Vatsa, Member, NDMA,Prabhakar Rai, special secretary, State Disaster Management Authority Sikkim, Johnny Ruangmei, Joint CEO, Nagaland State Disaster Management Authority (NSDMA)
“As India is striving to set a benchmark in adopting disaster risk transfer mechanisms tailored to its diverse geographies. Munich Re have experience in working with various regions and we are glad to be a part of some of the best practices such as FONDEN, African Risk Capacity, KABMN (Indonesia) etc.- These efforts can inspire global adoption of innovative solutions for managing natural disaster risks,’’ said Hitesh Kotak, Chief Executive, Japan, India, Korea, and South-East Asia at Munich Re.
He called for clarity in guidelines for utilising State Disaster Mitigation Funds (SDMF) funds for premium funding of any Disaster risk insurance cover in the country.
“We must address the critical challenge—the elephant in the room—that goes beyond just the structural design of the products. The key question is what will be the source of funds for disaster risk transfer mechanisms? Can the existing financial resources be effectively allocated and utilized to support these mechanisms?’’ asked Kotak.
Michael Roth, PSB specialist, Munich Re, pointed out India is pioneer in using insurance to address social objectives and can now similarly develop various risk financing tools , such as insurance, CAT bonds etc, to address the insurance protection gap.
The participants from DFS and NDMA emphasised that the current guidelines for utilisation of SDMF funds also sufficiently empowers the States and SDMA’s to adopt insurance as one of the risk transfer mechanisms. They encouraged states to design insurance schemes for specific needs of the state, say for covering losses due to excess rainfall, Cyclone,Earthquake, among other perils.
The participants highlighted that there is a need for adopting the example set by Nagaland and work towards creating a resilient and sustainable disaster risk financing solution.
Other professionals and experts also deliberated on multi pronged strategies to reach out to vulnerable communities and raising awareness about disaster insurance.
They suggested that more advertisement is required on the availability of the customised parametric products for the states.
There was a consensus among them that the risk management is the first step to manage disaster risk transfer and financing and there should be tangibly meaningful products and solutions available with data democratisation and incentivisation.
Various sessions of the event provided an overview of the key design elements of parametric products , such as triggers and payout mechanisms, while demonstrating how these innovative products address region-specific vulnerabilities and promote financial resilience.
Surbhi Goel, Munich Re India Branch’s CEO, summed up,“Natural disasters have far-reaching socio-economic impacts, disproportionately affecting vulnerable communities through loss of life, infrastructure damage, and economic setbacks. This is where innovative risk transfer mechanisms, particularly insurance solutions, become critical. By shifting financial risks from governments and individuals to a wider capital pool, insurance accelerates recovery, minimizes economic disruption, and strengthens resilience.”
Parametric insurance, catastrophe bonds, and public-private partnerships can play a transformative role in bridging the protection gap, ensuring a more proactive and sustainable approach to disaster preparedness and recovery, concluded Goel.
Munich Re, which has provided reinsurance covers to Nagaland paramentric cover along with other reinsurer, also showcased illustrative parametric insurance products designed for India, including solutions tailored to North Eastern states and micro-borrowers.
Others who participated in the event are _ Krishna S Vatsa, Member, NDMA, Safi Ahsan Rizvi, Advisor (Mitigation), NDMA, Mandakini Balodhi, Director(Insurance), DFS, Hui Lin Chiew, Technical Expert, Climate and Disaster Risk Finance and Insurance (CDRFI)Competence Center, Frankfurt School of Finance, Prabhakar Rai, Special Secretary, Sikkim SDMA, Gaurav Arora from ICICI Lombard, Manik Nehra from Bajaj Allianz, Harini Kannan from – HDFC ERGO General Insurance and Priya S Kumar from SBI General.
Over the past few years, India and countries across the globe have experienced an increase in the frequency, intensity, and geographical spread of catastrophic events. This trend has had a significant impact on the entire ecosystem, including government re/insurers and common man.