Hydropower, Flood Prone Road Projects Reaching Point of Non-Insurability in India

As India accelerates infrastructure expansion to drive economic growth, a new report warns that rising climate risks may be outpacing the country’s ability to insure these assets, potentially exposing governments and investors to growing financial stress.
The report, Climate Risks and Insurance for India’s Infrastructure, by Climate Trends finds that while most of India remains within the limits of insurability, insurers flagged mounting concerns around assets such as hydropower projects, highways, and urban infrastructure in high-risk regions.

2025 reinforced the dominance of hydro-meteorological events in India’s climate impacts calendar. The report notes that flooding, extreme rainfall, cyclones, and landslides were identified as high to very high risks (scores 4–5) for capital-intensive infrastructure such as urban assets, highways, ports, and hydropower projects, driving repeated losses and rising insurability concerns The study establishes that growing uncertainty due to climate impacts is making accurate risk pricing more difficult, potentially widening the protection gap between economic losses and insured coverage.

The authors spoke with several leading insurance companies of the country, like SBI General Insurance, Munich Re India, Swiss Re India, and General Insurance Corporation of India. Aarti Khosla, Founder & Director, Climate Trends said, “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.

The country’s rising exposure for its essential assets could thus lead to mounting climate-induced losses, which would be a fiscal and financial burden. Climate resilience must therefore be integrated into infrastructure planning from the very beginning to minimise the costs of post-disaster reconstruction. Also, several steps will have to come together to ensure long-term insurance viability for such assets, such as advanced actuarial models and standardised frameworks for risk disclosure, premium pricing and loss assessment.”

Rising climate losses are straining insurance sustainability, with global insured property losses exceeding USD 140 billion in FY 2024–25 and India’s 2023 natural catastrophes (NAT CAT) losses reaching USD 12 billion, well above the previous decade’s average. Sub-nationally, Assam, Andhra Pradesh, Odisha, Uttarakhand, Himachal Pradesh, parts of Ladakh, Sikkim and the north-eastern states are deemed to be the most vulnerable. However, data indicates that some of the largest infrastructure projects by investment are also situated in these vulnerable regions, with the total investments amounting to Rs 2.95 lakh crores. Ranging from Odisha’s Paradip port modernisation project, to Rs 5000 crores worth of port projects in Andhra Pradesh, tunnels and highways worth Rs 38,000 crores in Himachal Pradesh, Teesta hydropower project in Sikkim, Zozila tunnel and BRO roads project in Ladakh, and Arunachal Pradesh’s Etalin, Dibang and many other
dam, highways and hydropower projects.

Key Findings at a Glance
● India’s infrastructure spending now exceeds 3% of GDP and is expanding rapidly in climate-vulnerable regions.
● India’s rapidly growing insurance market reflects rising climate vulnerability, with premiums projected to grow at 6.7% (life) and 8.3% (non-life) through 2028, according to Swiss Re

● Floods, cyclones, landslides, and extreme heat account for the majority of climate-related infrastructure losses, affecting mostly roads, coastal projects, and urban infrastructure

● Climate impacts are becoming more frequent and predictable, pushing some regions closer to the threshold of uninsurability.
● Difficulties in pricing climate risk under uncertainty may widen the gap between insured and actual losses.

Key Insights from Insurers
● Climate risk is now a core insurance concern: All insurers surveyed flagged climate impacts as a high-risk factor for long-term profitability, even as they see climate insurance as a key growth area.
● Climate risk pricing is falling behind reality: 100% of insurers said existing models cannot adequately capture evolving climate risks, pointing to data gaps, modelling uncertainty, and a widening protection gap.
● Premium stress is building for infrastructure: Two-thirds of insurers reported rising premiums since 2015, while all confirmed affordability challenges for infrastructure projects—especially hydropower assets.
● Innovation is underway, but gaps remain: Insurers are rolling out parametric and climate-responsive products for floods, cyclones, heat, and rainfall, but no coverage yet exists for cloudbursts and landslides.

The full report can be accessed here.