Building a Safer Future: The Critical Role of Insurance in Disaster Resilience
Kathmandu – As Nepal grapples with increasing natural disasters, including floods, landslides, and earthquakes, the need for a robust, inclusive insurance system has never been more pressing. Insurance, as highlighted at the 2024 International Conference on Inclusive Insurance (ICII) in Kathmandu last month, is not just a means of financial recovery; it’s a vital tool for national resilience.
The 2004 Indian Ocean tsunami serves as a stark reminder of the consequences when regions lack sufficient financial protection. Nepal faces similar vulnerabilities, given its mountainous terrain and climate-related risks like floods, landslides and earthquakes, which frequently disrupt lives and livelihoods. With much of its population exposed to disaster risks and lacking adequate financial coverage, the need for reform in Nepal’s insurance infrastructure is critical.
Reflecting Nepal’s commitment to disaster resilience, the country participated in the 2024 Asia-Pacific Ministerial Conference on Disaster Risk Reduction (APMCDRR), promoting a multi-stakeholder approach that includes government agencies, civil society, and community groups. However, Nepal’s disaster risk reduction (DRR) efforts, while progressive, often face financial constraints and infrastructural bottlenecks, underscoring the need for international support and investment to ensure sustained resilience.
Insurance has the potential to bridge the financial gap and serve as a tool for socio-economic stability in disaster-prone regions. Examples like Turkey’s Catastrophe Insurance Pool (TCIP), highlight how accessible and structured insurance systems can shift the financial burden of disasters from individuals to the wider community. Turkey’s model has made insurance accessible to a vast majority of urban residents, reducing government spending on recovery and increasing public awareness of risk reduction. Implementing similar systems in Nepal can be more helpful for protecting rural and low-income populations who often bear the brunt of natural disasters.
In September 2024, severe floods swept through several regions of Nepal, devastating homes, infrastructure, and farmlands, and displacing thousands. In the aftermath, insurance played a crucial role in supporting affected communities and accelerating recovery efforts. Insurance claims helped many flood victims recover lost assets and stabilize their livelihoods, allowing families to focus on rebuilding without falling into poverty cycles. The impact of these insurance payouts highlighted the importance of extending coverage to more vulnerable populations, demonstrating how insurance can act as a financial lifeline amid increasing climate-driven disasters in Nepal.
As Nepal contends with frequent natural disasters and the compounded challenges of climate change, inclusive insurance stands out as a critical tool for resilience. Beyond providing financial relief, insurance enables communities to rebuild faster, promotes investment in safer practices, and reduces the risk of falling deeper into poverty after disasters strike. For Nepal, where vulnerability is high and resources are limited, expanding access to affordable insurance is not just a financial strategy—it is a necessity. An inclusive insurance system can act as a lifeline, offering both immediate support and long-term stability for Nepal’s most at-risk communities. As the country pursues stronger disaster preparedness, accessible insurance must become a cornerstone of Nepal’s resilience framework, safeguarding lives, livelihoods, and economic growth. Investing in insurance not only enhances financial resilience but also encourages communities to adopt disaster risk reduction practices.