April 29, 2024
Insuring vulnerable people in India against extreme heat events

When Heatwaves Lead To A Loss Of Income

80% percent of India’s workforce is in the informal sector, with poor women making up 90-92% of this figure. Many use their house as a workplace and warehouse. Housing and its surrounding habitat are for these women not only a form of social security but a means for economic productivity. 

Climate risks such as heatwaves are mediated through the housing and habitat, but can also cause direct impact on the infrastructure, and impact the income of these workers as they cannot leave their homes during an extreme heat event. Without climate resilience and risk mitigation measures in place, the continued frequency and intensity of these events will only serve to exacerbate daily challenges. 

Implementing An Innovative Solution

Mahila Housing Trust (MHT) has been working since 1994 to enable access to basic services like water sanitation, energy, and housing to urban poor households, acting as a hybrid organization combining technical, social and research skills.  

MHT partnered with NDF manager Global Parametrics (GP) to implement, supported by NDF Technical Assistance Facility (TAF) funding, the Climate Risk Insurance programme for two women-led credit cooperatives covering three major industrial cities of Gujarat – Ahmedabad, Baroda and Surat – providing insurance coverage to 26,000 women members.

We jointly built an index-based risk transfer solution for excessive urban heat that is both sustainable, scalable, and attracts the support of local underwriters. It is the intention that this solution could serve as a blueprint to be implemented by other housing trusts and in other countries to improve urban resilience against excessive heat.

A Person-Centred Approach

The project has taken a holistic and person-centred approach, with MHT conducting ground-level climate risk assessment that fed into GP’s development of a product encompassing the aspects of urban heat events most directly correlating to impaired health and income. As part of this assessment, MHT conducted a series of Focus Group Discussions and close to one hundred key personnel interviews across the three cities.

With local partner Fields of View, MHT designed climate risk and insurance training games and communication materials for their cooperatives and members, to raise awareness about CDRFI solutions in communities where the uptake of insurance has historically been low. Furthermore, MHT implemented other low-cost but effective solutions to deal with heat, such as painting roofs white to cool the building.

A First-In-Kind Solution

The climate risk insurance product developed by Global Parametrics (NDF fund manager) in partnership with MHT, Howden, and Go Digit Insurance, is a first-in-kind product that will offer financial protection against extreme heatwaves for women working in the informal sector in India.

The transaction will utilise risk capacity from the NDF to underwrite three credit cooperatives for women against the risk of extreme heat in the cities of Ahmedabad, Vadodara, and Surat. The credit cooperatives will pass down the payout benefits to their members.

Furthermore, the transaction will introduce an innovative product to the market, accelerating and expanding scalable risk transfer programs into communities with limited access to these financial services.