IMF and ADB have urged Pakistan to introduce comprehensive disaster insurance as the country continues to suffer heavy losses from floods, earthquakes and extreme weather events. According to recent estimates, climate-related disasters cost Pakistan more than $2 billion annually.
In their recommendations, the International Monetary Fund suggested that all new development projects should carry insurance coverage to avoid massive losses that currently go uninsured.
The Asian Development Bank has also pledged support in devising a broader strategy to expand the country’s insurance market, which remains underdeveloped compared to international standards.
The two institutions have raised concerns that Pakistan’s weak insurance regulation, overseen by the Securities and Exchange Commission of Pakistan, is a major hurdle. Technical gaps in the system prevent the development of effective disaster financing mechanisms such as catastrophe bonds, risk pools and sovereign coverage.
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In 2024, the ADB approved a $500 million loan under the Climate and Disaster Resilience Enhancement Programme to strengthen Pakistan’s disaster preparedness, risk mapping and financing systems.
The National Disaster Risk Financing Strategy, also launched in 2024, outlined steps to mobilize both public and private insurance solutions, while the National Disaster Risk Management Fund developed a NatCat risk modeling tool to provide reliable disaster data for insurers and policymakers.
Analysts say that without robust disaster insurance, Pakistan will remain vulnerable to repeated economic setbacks triggered by natural calamities, making climate resilience a critical priority for the country’s financial stability.
