Global reinsurer Swiss Re has announced its role in helping India’s northeastern state of Nagaland secure parametric insurance for excess rainfall events that can lead to severe flooding.
The cover is based on a geospatially gridded dataset whose precipitation levels are derived from satellite observations.
The parametric structure is designed to cover the entire state of Nagaland through six distinct zones, with a stepped payout feature to ensure funds are allocated where losses occur and in proportion to the amount of recorded rainfall, to mirror its impact.
With Swiss Re as the reinsurance partner, Tata AIG General Insurance Company inked a Memorandum of Understanding with the Nagaland State Disaster Management Authority (NSDMA), to provide insurance protection for this year’s monsoon season.
In addition to protecting the State treasury’s balance sheet, the transaction will enable Nagaland to build fiscal resilience against natural disasters.
Nagaland is one of the smallest states in India located to the east of Assam and west of Myanmar.
Featuring a largely mountainous terrain where agriculture constitutes about 70% of its economy, Nagaland has high levels of humidity and heavy rains in the monsoon months of May to September.
As a result, the state is susceptible to damage from heavy rainfall, windstorm/hailstorm, flood and landslides, particularly during the monsoon season.
“This is Swiss Re’s first disaster risk financing arrangement in India,” said G Satish Raju, Swiss Re.
“Nagaland is a first mover and this transaction marks a positive step towards strengthening India’s resilience to natural disasters.
“With tropical cyclones Amphan and NIsarga hitting the eastern and Western coats of India in early 2020, the transaction serves as a timely model for other states looking to similar innovative re/insurance solutions that help protect their significant natural catastrophe exposures.”
Madhukar Sinha, EVP for Government & Rural Business at Tata AIG, noted, “We hope this unique initiative of Nagaland State Government would create awareness across the country on management of catastrophic risks through insurance.
“Since severity of catastrophic losses are very high, in my opinion, insurance is a far more superior and effective option for risk transfer than any other options available for the purpose.
“Tata AIG is committed to provide innovative insurance solutions on weather-related catastrophic risks.”
Johnny Ruangmei, Officer on Special Duty at NSDMA, Government of Nagaland, added, “The developmental building blocks and investment that the Government or community has put in for many years can be shattered in less than 15 seconds by a natural catastrophe.
“Disaster is no longer “IF” but “WHEN”. Therefore, investment in risk transfer is a prudent investment, cardinal to sustainable development.”
