Impact of Climate Volatility on Himachal Pradesh

Recently, Himachal Pradesh experienced over 20 flash floods, landslides, and cloudbursts, significantly disrupting life and damaging infrastructure. Such events are becoming more frequent, with their return period reducing, linked to global warming and climate volatility.

Natural Disasters in India

• Since 1900, India recorded 764 major natural disasters, with nearly half occurring after 2000.
• Between 2019 and 2023, India faced over $56 billion in losses from weather-related disasters, accounting for nearly a quarter of all climate losses in the Asia-Pacific region.

Parametric Insurance as a Solution

• Conventional insurance models are inadequate for unpredictable extreme weather events.
• Parametric insurance provides an alternative, offering quick payouts when predefined thresholds like rainfall or wind speed are breached.
• Payouts are triggered automatically based on independent data, delivered within hours.
• Thresholds are based on verified data from reputable sources such as the India Meteorological Department and NASA.

Applications of Parametric Insurance

• In Jharkhand, insurance policies help farmers by covering loan repayments if rainfall or temperature thresholds are met.
• In Rajasthan, solar power firms can secure payouts for lost output when sunlight hours drop below expectations.
• In Rajasthan and U.P., parametric insurance protected small-holder farmers from drought, providing automatic payouts when water availability fell below a threshold.

Global Adoption and Future Prospects

• Countries in Africa, the Pacific Islands, and the U.K. have successfully used parametric products for various natural disasters. 
• In 2024, Nagaland became the first Indian state to buy multi-year parametric cover for landslides and extreme rainfall.
• For India, treating parametric insurance as essential climate infrastructure is crucial, similar to UPI in payments. 
• This involves expanding data networks, promoting state-level adoption, and integrating insurance into public disaster responses.