Insurance for coastal communities

Growing natural disaster risks driven by climate change continue to pose serious threats to the lives, livelihoods, and properties of Bangladesh's coastal communities. For these vulnerable people, life is a constant struggle against natural calamities such as cyclones, storm surges, rising sea levels and floods. After each disaster, they rebuild their homes - often constructed from bamboo, mud, and corrugated tin - only to see them destroyed again by the next onslaught. In the context of this relentless cycle of destruction and rebuilding, a recent roundtable discussion---one that was supported by CARE Bangladesh and AOSED ---held in Khulna, rightly emphasised the urgent need for integrating climate finance and establishing robust insurance mechanisms, specifically tailored to protect these frontline communities.

Disaster insurance could play a critical role in cushioning the losses coastal communities face, safeguarding their homes, crops, and livelihoods. Yet, in a country where general insurance coverage remains limited, introducing disaster insurance might seem like an outlandish idea. The primary barrier is cost - especially in coastal regions where widespread poverty allows few to qualify for even basic insurance. Ironically, it is precisely those who are the least able to afford coverage need it the most, as they often lack the savings necessary for recovery.

Recognising this, speakers at the Khulna seminar proposed that the financial burden of disaster insurance should not fall on the already struggling communities, but instead, be borne by the world's major climate-polluting nations. They advocated for the government to take the lead in formulating a climate-specific insurance policy for poor, vulnerable populations, with funding sourced from international grants, including the Loss and Damage Fund, the Green Climate Fund, and the Adaptation Fund. Such a grant-based insurance scheme could fully or partially cover insurance premiums, providing coastal communities with a critical safety net against financial ruin in the aftermath of disasters.

There is an urgent need to invest in improved homes and disaster-resilient infrastructure to reduce long-term vulnerability. Bangladesh could draw lessons from India's experience in Odisha, a cyclone-prone state where millions kutcha houses made of mud and thatch have been replaced with of pucca houses under a massive government-sponsored housing project. These stronger houses have not only reduced damage but also saved countless lives during severe storms. In contrast, many coastal residents in Bangladesh remain trapped in a vicious cycle of damage and repair, rebuilding fragile homes after each disaster. It is time to promote disaster-resilient buildings in coastal areas by incentivising risk reduction.  At present, the meagre compensation that affected communities receive is barely enough to patch up their damaged homes. If coastal residents were supported in constructing disaster-resilient houses, they would be far better equipped to adapt to the growing intensity of extreme weather events.

Given the escalating risks, the government must step forward to introduce grant-based disaster insurance schemes and raise public awareness about them. At the same time, it is crucial to increase the financial autonomy and capacity of Union Parishads (UPs) to manage disaster-risk financing effectively. Strengthening local governance structures with adequate resources and training is essential to ensure efficient, transparent distribution of climate funds and successful implementation of a disaster insurance programme.