How a small Indian state overcame parametric insurance hurdles

As countries face challenges using parametric insurance, a small Indian state found success by taking control of the process.

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What did you do differently to make the parametric insurance work for Nagaland?

The most important learning was that we needed to set our own parameters that will trigger insurance payouts and not let insurers dictate this.

So, in the next phase, we figured our own thresholds. For example, we wanted the first partial payout to trigger if the rainfall touches 1500 millimetre (mm) in a region, and a full payout as soon as the cumulative rainfall reaches 2200 mm during monsoons, June to October. Similarly, we created thresholds for non-monsoon months, November to May.

We created a term-of-reference (TOR) with our conditions that mentioned our thresholds and that we will not work with private data but only with the data from Indian Meteorology Department and the data from our own automated weather stations.

With these terms we went into the open market inviting bids from insurers. Almost all insurers in India participated, and we selected our current insurer State Bank of India General Insurance Company, and our reinsurer is Munich Re, a global reinsurance company based out of Germany.

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