Index-Based Flood Insurance (IBFI) in Nepal with premium support from ISF

Nepal’s agriculture sector, a critical source of livelihood for millions, faces persistent threats from natural disasters due to the country’s diverse topography, climatic conditions, and geological vulnerability. Floods pose a significant risk to farming communities, with devastating impacts on crop yields, food security, and economic stability. To address these challenges, the InsuResilience Solutions Fund (ISF) co-funded the development and implementation of Nepal’s first index-based flood insurance (IBFI) product.

This initiative introduced a data-driven insurance mechanism designed to provide faster and more reliable financial relief to affected farmers. So far, key milestones have been achieved, including flood risk modelling, regulatory approval, and the introduction of the insurance product to 12 cooperatives, benefiting 5,611 paddy farmers in its first season.

Despite Nepal’s existing 80% government subsidy for agricultural insurance, this support is currently unavailable for new products or pilot initiatives like the IBFI scheme. To bridge this gap, ISF is now extending its support through premium subsidies in collaboration with Shikhar Insurance Company. This targeted assistance aims to make the insurance product more affordable for low-income, marginalised farmers in flood-prone areas until government subsidies become accessible.

By ensuring continued access to risk protection, this initiative plays a crucial role in enhancing financial security and climate resilience for Nepal’s most vulnerable farming communities.