India’s Infrastructure Push Faces Rising Climate Insurance Risks: Report

As India pushes an aggressive infrastructure expansion to sustain high economic growth and attract global capital, a new report has cautioned that rising climate risks may be outpacing the country’s ability to insure these critical assets—potentially exposing governments, developers, and investors to mounting financial stress.

The report, Climate Risks and Insurance for India’s Infrastructure, released by policy research organisation Climate Trends, finds that while most of India remains within the limits of insurability, insurers are increasingly concerned about assets located in climate-vulnerable regions. These include hydropower projects, highways, ports, and urban infrastructure, which are facing repeated losses from extreme weather events.

The findings come at a time when Indian policymakers and business leaders at the World Economic Forum (WEF) Annual Meeting in Davos are pitching India’s fast-growing economy and discussing whether the country can accelerate its journey to becoming the world’s third-largest economy, while seeking large-scale global investments.

Even WEF leadership has underscored India’s growth momentum and its increasing capacity to negotiate international trade agreements. However, the Climate Trends report warns that the physical risks of climate change could undermine the economic returns of infrastructure investments unless resilience is built in from the planning stage.

Climate Risks Intensifying Across Infrastructure Sectors

According to the report, 2025 reinforced the dominance of hydro-meteorological events in India’s climate risk profile. Flooding, extreme rainfall, cyclones, and landslides were rated as high to very high risks (scores 4–5) for capital-intensive infrastructure such as urban assets, national highways, ports, and hydropower projects.

These recurring events are driving repeated losses, increasing insurance claims, and raising concerns about long-term insurability in certain regions.

The study draws on consultations with leading insurers and reinsurers, including SBI General Insurance, Swiss Re India, Munich Re India, General Insurance Corporation of India (GIC Re), New India Assurance, and the National Disaster Management Authority (NDMA).

It notes that growing uncertainty around climate impacts is making accurate risk pricing increasingly difficult, potentially widening the protection gap between actual economic losses and insured coverage.

Insurers Flag Pricing Gaps and Rising Premium Stress

Insurers surveyed for the report unanimously flagged climate risk as a core concern for long-term profitability, even as they see climate-linked insurance products as a major future growth area.

However, 100% of insurers said existing risk models are struggling to capture evolving climate realities, citing data gaps, modelling uncertainty, and the rapidly changing frequency and severity of extreme weather events.

Premium stress is already visible. Two-thirds of insurers reported rising premiums for infrastructure projects since 2015, while all confirmed affordability challenges, particularly for hydropower assets located in fragile ecological zones.

While insurers are experimenting with parametric and climate-responsive products for floods, cyclones, heatwaves, and extreme rainfall, the report highlights that no insurance products currently exist for cloudbursts and landslides—two of the most damaging and unpredictable hazards in the Himalayan and northeastern regions.

High-Risk Regions Host High-Value Projects

The report identifies Assam, Andhra Pradesh, Odisha, Uttarakhand, Himachal Pradesh, parts of Ladakh, Sikkim, and the northeastern states as among the most climate-vulnerable regions in the country.

Paradoxically, many of India’s largest infrastructure projects by investment value are concentrated in these very regions, with total investments estimated at ₹2.95 lakh crore.

These include:

• Odisha’s Paradip Port modernisation project
• Port projects worth nearly ₹5,000 crore in Andhra Pradesh
• Tunnels and highways worth ₹38,000 crore in Himachal Pradesh
• The Teesta hydropower project in Sikkim
• The Zojila tunnel and BRO road projects in Ladakh
• Large hydropower and dam projects such as Etalin and Dibang in Arunachal Pradesh

Call for Climate-Resilient Planning

Commenting on the findings, Aarti Khosla, Founder and Director, Climate Trends, said that climate risks can no longer be treated as peripheral concerns in India’s growth story.

“As India seeks big investments at the World Economic Forum and plans double-digit nominal growth over the next five years, it would be remiss to not point out the risks to India’s infrastructure posed by climate impacts and extreme weather events—which are unarguably increasing in frequency, severity, and geographical spread,” she said.

Khosla warned that rising exposure of essential assets could translate into mounting climate-induced losses, becoming a significant fiscal and financial burden.

“Climate resilience must be integrated into infrastructure planning from the very beginning to minimise the costs of post-disaster reconstruction. Several steps must come together to ensure long-term insurance viability—such as advanced actuarial models and standardised frameworks for risk disclosure, premium pricing, and loss assessment,” she added.

Global and Domestic Losses Mounting

The report also places India’s situation within a global context. Global insured property losses exceeded USD 140 billion in FY 2024–25, while India’s natural catastrophe losses in 2023 touched USD 12 billion, significantly above the previous decade’s average.

With India’s infrastructure spending now exceeding 3% of GDP and expanding rapidly into climate-sensitive regions, the report concludes that the window for integrating climate resilience and insurance reform is narrowing fast.

Without coordinated action between policymakers, infrastructure developers, insurers, and financial institutions, the gap between economic ambition and climate reality could widen—posing systemic risks to India’s infrastructure-led growth model.

The writer of this article is Dr. Seema Javed, an environmentalist & a communications professional in the field of climate and energy