Flood-hit Pakistan moves toward disaster insurance

by Saleem Shaikh and Sughra Tunio | @saleemzeal | Thomson Reuters Foundation
Friday, 26 October 2012 12:54 GMT

A pilot programme for the country's poorest is seen as a first step toward universal coverage

MINGORA, Pakistan (AlertNet) – Hussain Khan lost everything in the 2010 floods that swept through Pakistan: His two children, his home on the banks of the Swat River, his dozens of cattle, sheep and goats, and his six-acre cherry crop.

Today the 43-year-old farmer, the sole breadwinner for a family of 10, works as a motel waiter in Mingora, a bustling town in the Swat Valley, some 160 kms (100 miles) northwest of Pakistan’s capital city Islamabad.  He is grateful to no longer be begging to survive, but he doubts he will recover his losses.

Across Pakistan, families hit by three consecutive years of extreme weather disasters – particularly severe flooding and droughts – are struggling to find ways to recover from ever-more-frequent disasters.

According to a report of the Federal Flood Commission, the 2010 floods, the worst in 80 years, alone claimed some 1,985 lives, and affected over 20 million people, 17,553 villages and 2 million hectares of crops.

Insurance, Pakistani officials say, may be one way of coping with the enormous social and economic consequences of such extreme weather.

Zafar Iqbal Qadir, chairman of the National Disaster Management Authority (NDMA), based in Islamabad, said the country has hammered out a plan to create national disaster risk insurance, which aims to eventually make it mandatory for Pakistan’s entire population to be insured against disaster risks.


A pilot phase of the programme, to be implemented starting in March 2013 with funding support from the World Bank, will provide free or subsidised insurance to those judged the country’s poorest and most vulnerable. Eventually, officials hope farmers, livestock producers and others will be included as well, said Ahmad Raza Sarwar, director of the National Institute of Disaster Management.

Sarwar told AlertNet that the size of the insurance premiums each person or family might pay is still being negotiated with insurance firms, as is the amount of coverage.

Details of the insurance are still being worked out among the disaster management authority, the Ministry of Climate Change, the Finance Ministry, and the Federal Economic Affairs Division, but authorities are confident it will soon be completed, said Mehmood Alam, federal secretary of the Pakistani climate change ministry.

The plan has enthusiastic support from at least some of the families hit hard by worsening extreme weather.

“We have been waiting for such insurance that will help us recover economic damages,” said Khan, of the Swat Valley. “The government’s aid flow for people affected (by disasters) remains too slow.”

Now “such insurance will be of great help for a farmer like me in the future to claim losses quickly if, God forbid, any disaster should happen again,” Khan said.

The insurance, developed after extensive consultations with insurance companies, financial regulators, banks, businesses and international financial institutions, aims to cover the risks posed by the climate-induced natural disasters that are becoming more frequent in the country.

Qadir, of the National Disaster Management Authority, said the World Bank will set aside around five percent of the development funds the Bank has committed for Pakistan for the project.

According to the World Bank’s Country Partnership Strategy (CPS) document, the Bank has committed $5 billion to Pakistan for 30 projects.

The programme, which the disaster management authority says would be the biggest insurance venture of its kind in the world, aims to eventually cover Pakistan’s 180 million people for the loss of human lives, livelihoods, shelter and livestock.

One early question raised about the insurance effort is how the poor will be able to afford premiums for insurance cover.

"This matter has also come under discussion and it has been now decided that premiums for those who can't afford will be subsidised and full premium for those living below the poverty line will be paid by the government," Qadir said.

“We are also negotiating with the potential insurance companies to discard their requirement for the insured to file claims. For, this is a time-taking exercise and we want the insurance cover to reach quickly to the disaster-hit people,” he added.

He said disaster victims need to get insurance payouts as quickly as possible after a disaster occurs.


Independent climate change and disaster experts said that although this is a welcome move, it remains to be seen whether the NDMA would be able to effectively implement its plan and provide relief to disaster-struck communities.

“In the past, we have seen the launching of good initiatives with much fanfare. But these then remain on paper only. What is seriously needed is a mechanism that allows for disaster mitigation and adaptation projects to be implemented in a true spirit,” said Sattar Zangejo, a disaster management expert who has worked with Oxfam International, the U.N. Development Programme, Australian AID and Plan International.

If and when a national insurance plan is initiated, an awareness campaign must be launched simultaneously to educate people about the benefits of disaster risk insurance, he said. This will help boost people’s interest in the programme, he suggested.

Across Pakistan, the devastating 2010 deluge caused agriculture and infrastructure damage worth over $84 million, while floods in 2011 cost the national exchequer an estimated $63 million, according to the federal finance ministry.

Economic damages from this year’s torrential monsoon rain during the first three weeks of September are estimated at $35 million, according to the NDMA. 

Saleem Shaikh and Sughra Tunio are climate change and development reporters based in Karachi, Pakistan.



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