Insurance and Climate Change events

In the recent past, our world is witnessing frequent hazardous events. At the present time, while writing this article, Hurricane Michael hit the US state of Florida; Similarly, Cyclone Luban has pose threat to the Middle East Asia.

In the same fashion, Cyclone Titli has shown its rage towards India’s Eastern Coast. And Tropical cyclone Cempaka kills 19 in the South East Asia. Even though the destructions are heavy, the number of insured or the insurance penetration figures are markedly low. It must be remembered that an insurance cover is one of the simple means for tackling crisis situation.

Risk Management 

Insurance as a risk management instrument assumes a more significant role as the world see a climate change induced havoc pattern. Recently, the Indian state of Kerala has witnessed the worst deluge in its living memory.

Devastating Deluge:

The Kerala flood has caused immense destruction amounting to an initial monetary estimate of INR 20,000 crores. Many lost their lifetime savings. The severity of damage is unbearable for several families who survived the deluge. This is especially because people do not possess protective insurance cover. Normally, people do not insure their shelter unlike their life and vehicles. Insurance cover helps us indemnify losses to property.

After the Deluge:

People, today, are heavily resorting to government and private aid for compensating the loss. One reason behind this unparalleled situation is that people in Kerala haven’t witnessed such a devastating flood in their living memory. They never thought of a risk to their property when things were normal.


Possible extreme events and their destructive probability are tended to increase in the coming years. Importantly, sea level rise and submergence of coastal land and land degradation will be devastating for coastal community. Landslide disasters are common in the hilly terrain.

These events will certainly emerge as national concern as they cause severe casualties as well as property, and livelihood damages and create a dent in the national economy. In such a scenario, financial experts are of the opinion that any aversion towards risk management instruments is simply suicidal.

Some Data

FDI in insurance sector in India has a limit of 49 percent. Life insurance penetration in India is a meagre 2.72 per cent and general insurance penetration stands at 0.77 per cent. Insurance penetration has increased to 3.49 per cent in 2016-17 from 2.71 per cent in 2001. But these official figures on insurance penetration are not satisfactory when considering the cadence in destructive events.

Risk Factors

In effect, plain regions, in due time, are at a greater risk from increased population density due to migration; Moreover, an increase in land fragmentation and land costs are expected; Significantly, with land alienation and lack of risk management, governments are at a more risk of ever increasing liability. To put it another way, a disempowered population will create unrest and this will result in an unimpressive social order.

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Image Courtesy:, Down to Earth and Kotak Mahindra

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