Event ReportCatastrophe Insurance in Disaster Management:

Meso-level Flood Insurance Pilot with OXFAM, Bangladesh

February 14th – 18th 2011

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Organized by:Centre for Insurance and Risk Management

Introduction

Floods are an annual recurring phenomenon in Bangladesh. Normal floods are considered natural assets needed to maintain the fertility of the land and over the generations the population have gradually adapted to thrive in these floods. But in the preview of climate change it has become vitally important to safeguard the "vulnerable" against the unpredictability of devastating floods.

Another effect of unnatural floods is the severe effect on the developmental plans of government and the portfolios of MFIs and Banks. Keeping the effect of this in mind the concept of ‘Meso-Level Flood Insurance Scheme’ for Sirajgunj District of Bangladesh was conceived. The project has three components; first one deals with developing a Flood Hazard Model, which was done by the Institute of Water Modeling. The second component of the project deals with developing a Flood Loss Model. These two components of the project have been completed over the last two years. The third component of the project involves using the former components to design the "Index Based Meso-Level Flood Insurance Scheme."

On February 14th, 2011 the Centre of Insurance and Risk Management hosted a roundtable for delegates from Bangladesh in Chennai, India. The round table was to discuss the feasibility of meso-level flood insurance for Bangladesh. The 5 day event was organized to apprise the Bangladesh government and other stakeholders of the design process. One of the most significant differences is the loss determination in the scheme that will be done ex-ante and hence the need for effective models.

The major highlights of the seminar discussion were:

Journey of Index based insurance in India – Targeting the effective ex-ante – Flood

Modelling The disaster management framework in India

The guiding question for most of the discussion was: ‘Applicability of flood index based Insurance for Bangladesh’

Participants:

1. Md. Nurun Nabi Talukder, Director General, NGO Affairs Bureau (Additional Secretary) 2. Mohammad Abdul Wazed, Joint Secreatry , Ministry of Food and Disaster 3. Parveen Mahmud, Deputy Managing Director, PKSF 4. Md. Jalalul Azim, Additional managing Director, Pragati Insurance Ltd. 5. Md. Habibullah Bahar, Director, Manab Mukti Sanstha 6. Md. Norul Amin, Economic and Private Sector Coordinator, Oxfam7. Amit Vatsyayan, Private Sector Advisor- South Asia, OXFAM GB

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Summary of the three day training session

Day 1

Speakers: Anuj Khumbhat, Director, WRMS Rupalee Ruchismita, Executive Director, CIRM

The first day started with the brief introduction on CIRM’s activities on various Insurance and risk management projects by its Executive director, Rupalee Ruchismita. This was followed by a session on Weather Index Insurance in India presented by Anuj Kumbhat, Director, Weather Risk Limited. This session brought to light the various weather index insurance products in India for agriculture and its advantages over the conventional area yield insurance products apart from triggering lot of discussion among the attendees. The afternoon session was entirely devoted to elaborate the Catastrophe Insurance on Meso Level Flood Insurance Design being implemented in Sirajgunj district of Bangladesh by Rupalee Ruchismita. This session acted as an ice breaker for the participants from Bangladesh and subsequently the day ended with discussions on the relevance of Index based flood insurance product for Bangladesh which was moderated by Amit Vatsyayan, Private Sector Advisor – South Asia, OXFAM GB.

Day 2

Speakers: Dr Debasish Lohar, Assistant Professor, Javadhapur University R. Devaprakash, Project Director, CARE India Azad Mishra, Product Manager, HDFC Ergo

The second day started off with an academic presentation on Numerical Weather Prediction Models and Early Warning Systems by Dr. Debasish Lohar from Jadavpur University. The session threw light on the Vulnerability and Hydro Meteorological Disasters of Bangladesh in the present scenario of Global Warming and Climate Change and the need for greater investment in developing better weather prediction models. The next session was anchored by R. Devaprakash from CARE INDIA who shared his institutional experience on tackling community damage

assessment, claims identification and quick claim settlement process as Post Cyclone disaster relief measure from the learnings after the devastating cyclone Nisha which hit Cuddalore district of Tamil Nadu. This was followed up by a practical presentation on Weather Insurance Contract Design and Pricing by Azad Mishra from HDFC Ergo. The day ended with a brief discussion and a recap of the entire day’s learnings.

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Day 3

Speakers: Sai Gunaranjan, CEO, Yousee V.S Prakash, Director, KSNDMC Arindom Baidya, Agricultural Analyst, CIRM

The third day started with Sai Gunaranjan, who headed Basix'’s insurance operations and played an instrumental role in launching the first weather insurance product in India making an elaborate presentation about the genesis of weather Insurance product in India and the learning’s in taking it to the farmers. This was followed by a rigorous technical discussion on the methodology of Index building adopted by the Institute of Water Modelling in Bangladesh for the catastrophic floods in the Sirajgunj district of Bangladesh for designing a Meso Insurance Product. This session brought lots of questions and curiosity on the board about the Flood Catastrophe Index Pilot. This was followed Dr. Prakash, Director of KSNDMC, who made an interesting presentation on the ex-ante disaster management framework in the state of Karnataka. The last session of the day was a brief presentation on other index based catastrophe insurance products in the world by Arindom Baidya, Agricultural Analyst, CIRM.

Field visit

The last two days of the roundtable were dedicated to taking the delegates for a field visit. The field visit was in the Howrah district of West Bengal. The agenda for the visit was to enable the delegates comprehend if the farmers had a clear understanding of index based insurance schemes.

Way Forward

The centre is looking forward to pilot the Meso level - Flood Insurance product for in Shirajganj district of Bangaldesh by May 15, 2011.

This training event will be followed by: Development of the loss index correlation with the flood estimation model. The centre is negotiating with four reinsurers and in the coming months will choose

one as a project partner. Concurently, the project team will assist Pragati Insurance file the innovative product

in Bangladesh

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