Designing a Disaster Risk Insurance Framework for Pakistan

The vulnerable people of Pakistan face disruptive shocks of natural hazards such as flood, earthquakes, drought and other impacts, every few year. Insurance reduces the catastrophic impact of disasters, enables a timely recovery, and can be coupled with other disaster risk management to soften the impacts of catastrophic events on vulnerable communities. Insurance can and should also be linked with risk reducing, preventive activities. Prudently employing a combination of insurance measures with risk reduction, including, early warning, education, infrastructure strengthening, and land-use regulations, can greatly reduce the immediate losses and long-term development setbacks from disasters. In addition, by creating a secure investment environment, insurance instruments can enable productive risk taking on the part of individuals and governments, and in this way reduce disaster-induced poverty traps. However, insurance for natural hazards is not affordable or even available to many in the most vulnerable communities in Pakistan. This led Government of Pakistan work with Munich Climate Insurance Initiative (MCII) and supported by the Climate Development and Knowledge Network (CDKN) in first phase of the project – February to April 2014. Phase 1 resulted in the design and proposed option for a viable national fund designed to help the most vulnerable communities better manage natural hazards.

By moving forward in this endeavor, In phase 2, five districts Poonch, AJK; Charsadda, KPK; Ziarat, Balochistan; Tharparkar, Sindh; Bahawalnagar, Punjab district and population are chosen for the insurance pilot. The fund design in the second phase will focus on encouraging the beneficiaries to become active reduce their own risk. This requires logistic, regulatory, legal and risk assessment resources lead by the National Disaster Management Authority The project works with insurance regulators to help create an enabling regulatory environment, legal and financial experts in establishing the fund, as well as technical risk assessment experts to ensure the viability of the fund. The undertaking of the National Disaster Management Authority in Pakistan to explore a possible National Disaster Insurance Fund is groundbreaking. It provides leadership and innovative vision in addressing some of the most acute, and often invisible, challenges of protecting vulnerable people from the risks of natural hazards.


Flooding in Rawalpindi pushes the poor and vulnerable further into poverty


When drought ravishes the Thar Desert, farmers and herders are forced to migrate


Welfare in Pakistan is undermined by the repeated damage and destruction caused by drought, landslides, cyclones and tsunamis


Climate Risk Insurance has the potential to stop the poverty cycle in Pakistan


Vulnerable people, faced with Pakistan's rapidly changing climate, can use Climate Risk Insurance to rebuild their lives