The World Bank will like Indian government to issue catastrophic bonds to offset major disasters.
Lead Insurance and Risk Management Specialist, World Bank, Eugene N Gurenko, told Hindustan Times on Wednesday that World Bank had also suggested setting up of a special catastrophic insurance pool for government infrastructure assets.
He said in 2005 India piled up natural disaster losses to the tune of $ 7 billion. Only about 10 per cent of it was insured that too because Mumbai was affected, he added.
Ninety seven per cent of losses due to natural disaster is not covered by any insurance in developing countries. In the developed 50 per cent of losses are covered.
Only 0.5 per cent of Indian homes have catastrophic insurance, compared to France and New Zealand's 100 per cent. The figure for Turkey is 15 per cent. The US is 15 per cent as many wealthy people do not want it, he added.
Indian insurance companies are offering catastrophic risk coverage and people must take it alongwith fire risk, he said.
In the non life insurance sector risk capital worldwide is around US $ 400 billion clearly inadequate for potential natural disaster losses. The Kobe earthquake itself caused economic loss of US $ 150 billion ,he said.
The Indian government should make it mandatory for banks to get an insurance risk cover for homes while lending house loans in disaster prone areas, he added.
Dr Gurenko is in New Delhi to attend the Regional Conference on Hazards of Nature, Risks and Opportunities for Development in South Asian Countries.
While rapid onset disasters are sudden and cause huge losses like tsunami, earthquake etc. It is the slow onset disasters like drought which seriously impact socially vulnerable sections of the society like farmers, he added.
The Agriculture Insurance Company of India offers comprehensive insurance for crop losses but it pays too late and being heavily subsidised is a drain on tax payers money, he said. About 18 million farmers hold this policy, he added.
A new concept which has come in, is parametric weather coverage. About 250,000 policies were sold last year in which farmers are paid if temperature or precipitation drops or rises from the average putting the crop at risk. The farmer is paid even if there is no loss to the crop, he added.