Cyclone, quake or landslide? There's a new insurance product on way.

Subscribe to enjoy similar stories. The Centre has engaged its top disaster management agency to carve out an insurance product to mitigate the impact of losses from climate change-related events.

The move comes in the backdrop of increasing frequency of such extreme events in the country, with large segments of populations in disaster-prone areas unable to cope. Two persons aware of the matter said on condition of anonymity that the National Disaster Management Authority (NDMA) has constituted a working group called Committee on Disaster Risk Reduction (CoDRR), with the department of financial service as a member, to develop a ‘single-peril parametric insurance’ product for the Indian market.

A single-peril parametric insurance policy pays out a fixed amount against loss of life or property if a specific event occurs, including cyclones, floods, earthquakes, or even excessive heat, cold or rainfall. The payment is based on the magnitude (parameter) of the event, and not the actual losses.

Also read | Mint Primer: Are we spending enough to fight climate change? Once the framework for the insurance is finalised, the Centre would ask insurance companies to design products, especially for economically vulnerable groups in disaster-prone areas, the first person cited above said. This person added that, if necessary, the Centre would subsidise the premium to make it affordable for vulnerable groups in disaster-prone areas.

States would also be roped in to financially support launch of such products, which may otherwise become expensive due to high reinsurance costs for the insurers. “The insurance sector supports catastrophic insurance, which requires collaboration between the government, insurers, reinsurers, and