In August 2024, when sheets of rain came pouring down on Kohima, Nagaland’s capital city, the retaining wall surrounding 70-year-old Vejopra Dozo’s home collapsed due to a landslide. “It was an especially bad bout of rain, and we even lost 40 to 50 bags of rice worth Rs 60,000, which were all washed away,” he told Mongabay India over the phone.
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In May 2025, a sum of Rs 25,000 was deposited in Dozo’s bank account, after he paid a visit to the District Disaster Management Authority. Unlike in the past, this compensation came not from traditional government funds, but from insurance. In the time it took for Dozo to be compensated, the Nagaland government was adding its finishing touches to a new extreme-weather insurance scheme which enabled the payout.
Called the Disaster Risk Transfer Parametric Insurance Solution (DRTPS), the scheme is the first of its kind in the country, which insures the entire state against heavy rainfall. The scheme was relaunched last year after making revisions to its design. So far, payouts worth Rs 1.06 crore have been made to residents impacted by heavy rain and other hazards.
Kohima city. In August 2024, following rains and landslide in Kohima, the retaining wall surrounding Vejopra Dozo’s home collapsed. In May 2025, he received a payout of Rs 25,000 after a visit to the District Disaster Management Cell. Image by Shyamal L. via Wikimedia Commons (CC BY-SA 4.0).
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“Although the eastern districts were hit hardest by rainfall-induced risks, other regions including Mokokchung, Dimapur, Phek, Kohima, and Wokha also experienced the effects of heavy rainfall, in addition to facing other concurrent challenges such as fires, pest outbreaks, drought, and human-wildlife conflicts,” said Noyingbeni Kikon, project coordinator at the Nagaland State Disaster Management Authority (NSDMA), in an email to Mongabay India.
The scheme offers a new approach to raising finance for climate resilience, experts say. However, its success will depend on long-term performance. “When the frequency of extreme weather events goes up, insurance coverage may cause premiums to go up. We have examples of this happening across various geographies.” said Neha Khanna, Associate Director at Climate Policy Initiative, a research group specializing in climate finance. “The model can certainly be replicated, and it’ll be interesting to see how it pans out over the long-term in Nagaland.”
Parametric scheme’s design
Unlike conventional insurance schemes, which release funds after assessing damages, parametric insurance is automatically triggered when weather-related parameters are met.
Nagaland first began experimenting with parametric insurance in 2021, when it collaborated with Tata AIG and reinsurer Swiss Re to run a pilot programme catered towards heavy rain. However, the programme’s failure to release payouts — due to a high threshold and inaccurate data — prompted the state government to redesign the programme in 2024, prioritising its own terms.
The new design relies on gridded rainfall data from the India Meteorological Department and the state’s 34 all weather stations to capture actual rainfall, temperature, and humidity levels. “All Tehsils covered under the scheme have been classified into high, medium, or low flood risk zones, with each zone assigned a pre-defined sum insured,” said Priya Sampath Kumar, Business Head – Emerging Business Lines of the scheme’s new insurer, SBI General Insurance.
The scheme triggers a payout when monsoon rainfall crosses 1,500 mm, with payments valuing 10% of the affected tehsil’s sum insured. Every subsequent 80 mm increase in rainfall invites an additional 10% of the sum insured, and a 100% payout occurs when rainfall crosses 2,200 mm, according to state government documents.
The home of one of the beneficiaries of extreme-weather insurance payouts in Nagaland. They said they received just enough to create a makeshift structure with tarpaulin and not rebuild the wall. Image by special arrangement.
To avail this service, the state is paying SBI General Insurance and reinsurer Munich Re an annual premium of Rs 4.5 crore for a coverage of up to ?50 crores, and 150 crores for three years. Expensive premiums and the potential for fund wastage when a payout is not triggered are some of the reasons states hesitate in rolling out similar schemes, experts in parametric insurance had told Mongabay India.
According to Johnny Reungmei, Joint Chief Executive Officer of the NSDMA, the reason Nagaland’s parametric insurance model is unique is because it has a provision for payout if no claims are made, as well as for unseasonal rainfall (albeit with different terms). “We needed to make sure our interests were met. This design ensures there’s a balance between the premium and payout, with an advantage not only to the insurer, but for the insured as well.”
The Nagaland government also used the support of the InsuResilience Global Partnership, an organisation aimed at helping developing countries finance disaster risk management, to set up a decentralised payments system. Beneficiaries fill out application forms with the details of damages, which are uploaded to a management information system and assessed by a district nodal officer, relief officer, and a final approving authority.
“After an applicant is verified and approved, the system integrates their verified bank details and after which the sanctioned insurance or relief amount is automatically disbursed into the beneficiary’s account,” said Kikon. In the absence of a bank account, the scheme has a “locker” facility for cash payments.
Payouts from parametric insurance are unlikely to cover the full extent of damages caused by extreme weather events, however. “With the ?25,000, I was able to create a makeshift structure with tarpaulin, but rebuilding the wall will be more expensive,” he told Mongabay India.
Rain in Mon district, Nagaland. While the whole state experiences heavy rainfall, the eastern districts are hit hardest by rainfall-induced risks. Moreover, the state also faces fires, pest outbreaks, drought, and human-wildlife conflict. Image by Nayantara Siruguri.
Scaling insurance
The viability of a national or sub- national level disaster-risk coverage depends on the scale of the scheme, as well as the models used to assess risk and calculate premiums, said Khanna of CPI. “Scaling up parametric insurance would involve recalibrating risks and resources, which could lead to higher premiums. Ultimately, states will have the opportunity to assess and determine whether the benefits justify the cost.”
In a reply to a question raised in the Rajya Sabha in March, the Ministry of Home Affairs indicated it was studying how to extend parametric insurance cover to all citizens. In 2016, the Prime Minister’s 10 point agenda on Disaster Risk Reduction included an objective of risk coverage for all, “starting from poor households to SMEs to multinational corporations to nation states.”
In its reply, the National Disaster Management Authority said it “has been engaged with several national institutions like Insurance Regulatory and Development Authority of India (IRDAI), General Insurance Corporation of India (GIC Re) and Insurance Institute of India (III) as also multilateral institutions,” to study four types of disaster risk insurance-based mechanisms. These include a national insurance scheme for disaster-related deaths, synchronising relief assistance with crop insurance, creating a risk pool for infrastructure protection and recovery, and access to international reinsurance for outlier hazard events.
“By including high-frequency, low-severity risks in their portfolio, insurers can better manage risk, leading to more stable profitability,” said Kumar of SBI. “Several northeastern and coastal states—whose boundaries are adjacent to shorelines—have expressed interest in implementing the DRTPS . However it takes time to structure the contours. Various parameters along with data needs to be evaluated and then a suitable product can be proposed.”
This article originally appeared on Mongabay. Read the original article here