Disaster insurance, closely linked to uncertain weather patterns and unpredictable harvests, is yet to figure as a possible recourse for farmers in the country. Given the vulnerabilities that characterise farming in this region, insuring crops against natural calamities is of paramount importance. Disaster insurance goes beyond traditional crop insurance by focusing specifically on calamities -- primarily climate-induced disasters. According to the Climate Risk Index, Bangladesh ranks as the seventh most vulnerable to natural disasters globally. The National Plan for Disaster Management (2021-2025) highlights that cyclones such as Roanu, Mora, Fani, Bulbul, and Amphan have battered coastal areas, while the monsoon floods of 2020 submerged over 36 per cent of the country, affecting 30 districts in the northern, northeastern, and southeastern regions.
Disaster insurance, a critical component of climate risk insurance (CRI), encompasses traditional crop insurance, index-based crop insurance, and weather index-based products. CRI acts as a financial safeguard against extreme weather events, enabling vulnerable households to manage climate shocks, reduce migration pressures, and safeguard food security. Studies suggest that disaster insurance can protect small farmers from financial ruin caused by adverse weather, especially when combined with anticipatory actions to mitigate risks. The Department of Disaster Management (DDM) reports that disaster management committees at the ward level, in conjunction with insurance coverage, can support farmers in high-risk areas, address climate change impacts, and enhance food security in Bangladesh. The synergy between anticipatory actions and disaster insurance can significantly reduce damage that farmers and low-income rural communities might have to endure.
Anticipatory actions involve proactive steps taken before a predicted disaster occurs or before its worst effects are felt. While insurance does not prevent the immediate impacts of disasters, it mitigates financial losses by pooling risks in exchange for premium payments, providing indemnification against damages. Experts advocate for small-scale payouts to enable farmers to reinvest in agriculture without falling into financial distress.
Weather-related risks are particularly significant for poor populations in developing countries, where an estimated two-thirds depend on agriculture and natural resources for their livelihoods, according to a World Bank report. This includes not only farmers but also rural residents whose employment and income are directly or indirectly tied to agricultural productivity. Recognising the need for effective insurance solutions, weather index-based crop insurance (WIBCI) is currently being tested through pilot projects in the country. One initiative, led by state-owned insurer Shadharan Bima in collaboration with the Bangladesh Meteorological Department (BMD), and another by private insurer Green Delta, are exploring the viability of such models. Under WIBCI, farmers are entitled to compensation when certain climatic trigger points are met. For instance, a cyclone or tropical storm reaching a specified magnitude or rainfall exceeding or falling below a defined level would trigger payouts. This type of coverage provides farmers with the confidence to plan and save for the long term, despite sudden weather-related setbacks. While still in its early stages, the initiative has the potential to expand with the support of all stakeholders, offering a crucial financial shield for small farmers against the mounting risks posed by climate change.
