Creating a disaster risk insurance product for coastal communities in Bangladesh

Creating a disaster risk insurance product for coastal communities in Bangladesh 

Project Lead: Pula Advisors
Supporting Partners: Bangladesh Ministry of Disaster Management and Relief
Support: Received mentoring and training from the Ocean Resilience Innovation Challenge (ORIC) which is financially supported by the Swiss Re Foundation, the UK’s Blue Planet Fund, and the United States Department of State. 
Location: Bangladesh
Financial Innovation: Parametric Insurance
Project Timeline: 1 January 2024 – ongoing

Summary 

Pula Advisors is on a mission to revolutionise disaster resilience in Bangladesh through a groundbreaking parametric insurance product designed to protect against the devastating impacts of typhoons, floods, and droughts. This innovative insurance solution guarantees not just to compensate those affected by seasonal disasters, but to proactively shield climate-vulnerable communities, ensuring a predictable and timely response when their crops or coastal farms suffer damage. With its affordability and quick, transparent pay-outs, this product stands in stark contrast to traditional indemnity insurance.   

Challenge 

Bangladesh is located at the interface of two contrasting landscapes: the tumultuous Bay of Bengal to the south and the majestic Himalayas to the north. This unique positioning makes the country prone to monsoons and catastrophic events like tropical cyclones, floods, storms, drought, and landslides. The ferocity of these cyclones often leads to severe tidal surges that inundate coastal districts, causing great damage to agricultural farmlands and leading to significant crop losses. 

In June 2022, the northeast region was hit by catastrophic floods which affected 7.2 million people and displaced over 4.8 million. The aftermath was devastating: 83,394 hectares of land were severely damaged, and livestock losses amounted to a staggering USD$28.1 million. While the Government of Bangladesh’s disaster management initiatives have decreased flood-related fatalities, the economic toll continues to rise, threatening the very assets and development gains the nation has worked so hard to achieve. 

Solution

In response to this escalating crisis, Pula Advisors is developing a hybrid insurance product which combines the strengths of Parametric Cyclone coverage with Area Yield Index Insurance. This dual approach addresses the multifaceted challenges posed by cyclones, floods, and droughts. The cyclone coverage tracks the magnitude of wind speeds and excess rainfall, while the Area Yield Index Insurance assesses actual crop yields in affected districts. Together, these tools form a robust disaster risk management product and an effective risk financing tool, empowering vulnerable communities to better navigate climate shocks and providing resilience from financial losses. 

Scalability and Next Steps

As part of the ORIC23 cohort, Pula Advisors is actively refining the product design and methods to engage with community and government stakeholders. They are developing mechanisms to provide education and training to farmers and customers, ensuring the benefits of this insurance reach those who need it most. Additionally, Pula Advisors is raising awareness through targeted marketing campaigns, encouraging widespread take-up of this vital product. 

“We are pleased to join forces with ORRAA and its partners to deliver this transformative product to coastal communities in Bangladesh. The scale of the programme will provide much-needed certainty to the most vulnerable communities, unlocking investment opportunities across the nation while implementing effective risk mitigation strategies against natural disasters.” – Pula Advisors