Building resilience: Climate risk insurance for agrarian communities

A significant milestone in Bangladesh's fight against climate change was marked on December 22, 2024, with the successful organisation of a workshop titled "Insights to Action: Sharing Results and Experiences of Climate Risk Insurance", bringing together more than a hundred prominent stakeholders to reflect on the achievements and challenges of the Climate Risk Insurance (CRI) initiative in Bangladesh. This event served as a vital platform for policymakers, insurers, financial institutions, researchers, NGOs, and the private sector to engage in meaningful discussions on how to scale up CRI, a groundbreaking solution to protect vulnerable communities from the adverse impacts of climate change.

Since its launch in 2020, the CRI project has made significant strides in providing financial relief to marginalised communities in flood-prone areas, benefiting over 45,000 farmer households, or approximately 180,000 individuals. Through an innovative, index-based insurance model driven by weather data, CRI offers payouts to those affected by extreme weather events and disasters like floods, enabling them to recover and adapt. With support from the World Food Programme (WFP), Korea International Cooperation Agency (KOICA), Oxfam Bangladesh, Gana Unnayan Kendra (GUK), RDRS Bangladesh, and Green Delta Insurance Company, the initiative has contributed to the financial resilience and food security of vulnerable populations while advancing multiple Sustainable Development Goals, including No Poverty, Zero Hunger, and Climate Action.

At the heart of the workshop was the recognition of CRI's transformative impact on building climate resilience, especially for rural communities dependent on agriculture and natural resources. Participants highlighted the achievements of the project over the past five years and stressed the necessity of collaboration among the government, private sector, and civil society to ensure the sustainability of CRI initiatives. Key discussions included integrating CRI into national disaster risk management frameworks and climate adaptation strategies while addressing barriers such as policy framework, high premiums, subsidy, limited awareness, and accessibility issues among others.

The workshop also explored opportunities for securing funding through global climate finance mechanisms like the Global Shield initiative. Bangladesh, as one of the first recipients of the Loss and Damage Fund under this program, aims to leverage these resources to expand CRI and further strengthen its climate resilience efforts.

In closing, the event concluded with a call for coordinated efforts to extend CRI to more communities across Bangladesh. This collaborative approach aims to build the capacity of vulnerable populations to withstand the intensifying impacts of climate change. The CRI project remains a shining example of innovative solutions that protect lives and livelihoods, offering a path toward a more resilient future for the country.

Recommendations:

1. Recognize Climate Risk Insurance (CRI) as a distinct category with flexible, location- and risk-specific premium structures to enhance scalability.

2. Ensure accessible, equitable CRI schemes with higher subsidies for costlier flood insurance premiums to promote climate justice.

3. Develop a national flood policy to protect livelihoods, ensure food security, and enable sustainable economic recovery.

4. Enable MFIs to formally partner with insurance companies to distribute climate and disaster insurance in rural communities.

5. Establish a national reinsurance model to reduce insurance costs and make CRI more affordable by retaining 100% of risks domestically.

6. Reduce the 15% premium tax for smallholder farmers to 5% or 0% for greater affordability.

7. Adjust CRI regulations to allow flexible premium rates tailored to location and disaster-specific risks.

8. Address policy, human resource, and awareness gaps to manage and utilize the Loss and Damage Fund effectively under the Global Shield initiative.

9. Expedite IDRA's 90-day claim settlement limit to ensure timely payouts and strengthen microcredit regulatory authority (MRA) guidelines for CRI distribution.

Riccardo Suppo, head of programme, World Food Programme (WFP)

This workshop marks the five-year journey of the Climate Risk Insurance (CRI) project, a collaboration between WFP and Oxfam. We celebrate its progress, reflect on lessons learned, and plan the next steps to expand this vital initiative.

Over time, the CRI model has proven effective but not universal. In disaster-prone Bangladesh, CRI acts as a lifeline for the most vulnerable, but its success relies on proper implementation. To scale its impact, we must accelerate policies, improve financial literacy, and ensure digital financial inclusion, making insurance accessible to all, especially those without technical expertise.

Key lessons shape the path forward. Timely payments—within three days of a disaster—are crucial, and aligning triggers with anticipatory action ensures swift resource deployment. As we expand CRI, reinvesting profits into risk mitigation will further build community resilience. Together, we can strengthen this initiative and provide meaningful support to those who need it most.

Dr M Aslam Alam, chairman, IDRA

Bangladesh's low insurance penetration presents a crucial opportunity to strengthen community resilience against climate risks like floods and cyclones. Disaster Risk Financing is now more critical than ever, with the insurance sector playing a vital role.

Key challenges include making premiums affordable while ensuring sustainability for insurers. Simplified processes and group-based policies can help rural communities access insurance. Addressing low awareness, trust deficits, high costs, and regulatory gaps is essential.

Regulatory reforms, such as enforcing disaster and agricultural risk insurance under the 2010 Act and mandating insurers to provide 0.5% of policies to rural areas, are vital. Collaboration with microfinance institutions can help market and deliver insurance products effectively.

I thank WFP and Oxfam for organizing this workshop. IDRA remains committed to policy support and fostering a robust framework for disaster risk financing. Together, we can enhance resilience and prepare Bangladesh for future climate challenges.

Dr Mohammad Moniruzzaman Khan, Science Connect Consultancy Limited

The ongoing Climate Risk Insurance (CRI) project aims to mitigate climate risks and ensure food security for vulnerable populations in Kurigram. Initially benefiting 4,700 households, the project now reaches 45,000. It offers three types of insurance: flood, crop, and a combination. A recent assessment, including surveys from 2,500 respondents, evaluated knowledge, resilience, and sustainability. 

The findings highlight the program's positive impact, especially in empowering women and improving food security. Despite challenges like premium affordability, 90% of respondents expressed interest in crop insurance. Recommendations focus on enhancing agricultural finance, risk management, and collaboration with government and stakeholders for sustainability.

Razwanur Rahman, director-general, Department of Disaster Management

Bangladesh, being disaster-prone, faces the inevitability of natural calamities. While floods were once predictable during the rainy season, recent years have seen an increase in flash floods, with areas like Cumilla, Noakhali, Feni, and Laxmipur being severely impacted. 

This year alone, we experienced five flash floods, some requiring helicopter rescues. In response to these evolving challenges, the Ministry of Disaster Management and Relief has been proactive in sharing risk, leveraging over 70,000 volunteers as part of the CPP program. Additionally, local disaster risk reduction plans are being implemented in districts like Kurigram, Sunamganj, and Cox's Bazar, involving committees at every level of society.

With support from WFP, Oxfam, KOIKA, and local NGOs, climate risk insurance is benefiting 45,000 households in Kurigram, making premiums affordable despite widespread poverty. Trust, as highlighted by the Chief Guest, is vital for this initiative's success. 

This workshop provides insights into the program's successes, challenges, and improvements, particularly addressing the unpredictability of flash floods. Bangladesh's progress in disaster resilience, demonstrated by the recent eastern floods, signals a hopeful future where climate risk insurance will support vulnerable livelihoods.

Mohamed Sayed Kutub, additional secretary, Financial Institutions Division, Ministry of Finance

Agricultural insurance in Bangladesh started in 1977, but the first case faced a massive 429% loss ratio, showing that insurance must be profitable to sustain. While pilot projects, like one in 2018, showed potential, scaling them up has been challenging, especially due to hurdles from the Agricultural Department.

Our main focus is on ensuring profitability and building competitive capacity for everyone involved. We're also tackling VAT and regulatory issues with authorities like the NBR. To boost disaster resilience and meet SDG goals, adopting effective insurance models and creating a national insurance policy is essential for long-term success.

Junsu Kim, deputy country director, KOICA

It's an honour to share insights on our collaborative efforts and the progress we've made. Guided by Quanta's core values—the 5Ps: People, Peace, Prosperity, Planning, and Partnership—we've worked together to implement a climate risk insurance initiative funded by KOICA. Over the past five years, in partnership with WFP, this initiative has benefited 45,000 vulnerable households, positively impacting 180,000 individuals in Kurigram.

This project has improved food security, introduced innovative approaches like forecast-based financing, and empowered vulnerable communities. Leveraging WFP's expertise has bolstered local governance efforts and community resilience.

We have the opportunity to institutionalize climate risk insurance as part of the National Social Security Strategy, creating a more resilient future for all.

Quamrul Hasan, WFP

Bangladesh must be prepared to manage climate risk insurance (CRI) funds effectively. While we are in the early stages of the global loss and damage fund framework, having the right policies, human resources, and strategies in place is crucial. The Climate Risk Insurance pilot provides valuable lessons to build upon, ensuring the government doesn't start from scratch. Bangladesh faces significant challenges, especially with flooding, which accounts for 50% of disaster-related damage. 

Insurance, particularly crop and flood insurance, plays a vital role. Crop insurance, with lower premiums, addresses frequent weather events, while flood insurance requires higher premiums for large-scale disasters. However, regulatory challenges hinder CRI's potential, such as fixed premium rates and inadequate infrastructure for rural distribution. 

For long-term sustainability, regulatory reforms are necessary, including faster claim processing, flexible premiums, and better support for disaster insurance distributors. With proper preparation, Bangladesh can better manage funds and protect vulnerable communities.

Mahmuda Sultana, programme director, Oxfam in Bangladesh

Bangladesh is one of the most vulnerable countries to climate change, and we must continuously seek innovative solutions beyond global funds. Exploring indigenous technologies and strategies is vital for our survival in climate emergencies.

This year alone, Bangladesh has faced five major catastrophes, with more expected. In this context, adaptation and mitigation strategies like the Climate Risk Insurance (CRI) initiative become crucial. Since 2015, CRI has impacted 45,000 families, providing valuable relief, even though challenges remain. This model has been developed through collaboration with Koica, WFP, RDRS, and GUK, and their support has been instrumental.

To institutionalize CRI, we need broader multi-stakeholder collaboration. CRI is not just a tool—it's an investment in food security, farmers, and livelihoods. Your contributions today will help shape its future. Thank you all for being part of this vital conversation.