Disaster Risk Financing in India:
By Major Rahul Jugran (Retd)
Disaster management in India has undergone a significant paradigm shift over the past two decades. The traditional emphasis on search, rescue, and post-disaster relief has gradually evolved into a more holistic framework that prioritises preparedness, mitigation, and resilience. This transition has been driven by the increasing frequency and intensity of natural disasters, which not only result in loss of life but also cause extensive damage to infrastructure, livelihoods, and economic stability. The financial implications of rebuilding damaged infrastructure and restoring public services have underscored the limitations of conventional disaster relief mechanisms.
Infrastructure, in theory, can be designed and constructed in accordance with modern safety standards, building codes, and disaster-resilient norms. However, in practice, enforcement remains weak due to multiple challenges. These include shortages of adequately trained technical manpower, inconsistent implementation of regulations, vested interests of various stakeholders such as builders, contractors, and developers, and limited public awareness of long-term resilience benefits. Consequently, the overall picture of disaster-resilient infrastructure development, especially in rural and rapidly urbanising areas, remains less than satisfactory.
To address these systemic gaps, there is a growing recognition of the need to strengthen capacity building and training for engineers, masons, architects, and officials at all levels of governance. Urban Local Bodies (ULBs) must be empowered with adequate manpower, technical expertise, and financial resources to enforce compliance, adopt localised solutions, and deploy emerging technologies for resilient construction. At the same time, fiscal incentives and sustainable long-term interventions are required to encourage disaster-resilient practices.
A critical pillar of this evolving framework is Disaster Risk Financing (DRF). DRF ensures that financial resources are available when disasters strike, enabling faster response and recovery while minimising economic losses. Importantly, DRF is not merely about the availability of funds but about deploying the right financial instruments at the right time. Its core principles include timely access to funds, risk layering through a mix of internal and external financial tools, efficient disbursement mechanisms, and data-driven decision-making using predictive modelling and analytics.
Traditionally, India’s disaster financing relied heavily on post-disaster (ex-post) mechanisms such as the State and National Disaster Response Funds (SDRF and NDRF). While these have played a crucial role in relief distribution, they often fall short of addressing long-term recovery and resilience needs. Recognising this gap, India has increasingly moved towards pre-arranged (ex-ante) risk financing mechanisms.
A landmark initiative in this direction is the Disaster Risk Transfer Parametric Insurance Solution (DRTPS), launched by the National Disaster Management Authority (NDMA) in August 2021. Unlike traditional indemnity insurance, DRTPS is a parametric insurance model that provides immediate payouts based on pre-defined triggers such as rainfall intensity, earthquake magnitude, or extreme temperature thresholds. This ensures rapid liquidity to states, enabling quicker recovery and reducing the fiscal burden on governments and communities.
The financial architecture of DRTPS involves collaboration between public institutions and global partners, including SBI General Insurance, international reinsurers, and institutions supported by global development finance. Pilot implementations, such as in Nagaland, have demonstrated its potential to bridge critical gaps in disaster risk financing by ensuring swift, predictable, and transparent payouts.
In conclusion, India’s journey in disaster management reflects a clear shift from reactive relief to proactive resilience. Strengthening disaster risk financing through innovative instruments like parametric insurance, coupled with improved governance, capacity building, and enforcement of resilient construction norms, is essential for safeguarding lives, infrastructure, and economic stability in an increasingly disaster-prone future.
(Major Rahul Jugran (retd) Manager, Disaster Mitigation and Management Centre, Uttarakhand)
