Prateek Singhal, Executive President & Head – Reinsurance at Howden India, believes that catastrophe bonds may be India’s “next shield”, emphasising the country’s need for instruments like cat bonds to protect its growing economy from climate risk.
Readers may recall that there have been recent calls for India to develop its own regulatory framework for insurance-linked securities (ILS), including catastrophe bonds.
This has become highly important as climate risk continues to intensify, and the global ILS market seeks geographic diversification.
In a recent interview with Artemis, Singhal underscored this need, while also discussing whether ILS is an area that Howden India is interested in participating.
“Catastrophe bonds may be India’s next shield. We believe India has a compelling need for instruments like cat bonds to shield its rapidly growing economy from massive climate risk, particularly because ILS can provide immediate, rules-based liquidity following a disaster.
“The regulatory environment is supportive of this innovation, with policy discussions positioning cat bonds as an “essential tool” for modern risk finance,” Singhal said.
The executive continued: “Howden has enormous experience in structuring insurance-linked securities, and we are continuously engaging with the partners on this.
“The effort mandates to establish the required data standards for cat bonds simultaneously addresses the data deficiencies that currently limit the scalability of parametric insurance. By engaging in the foundational phase while contributing expertise to the Cat Modeling Center.”
When asked where he expects to see the biggest advances in creating new risk pools and narrowing India’s protection gap, Singhal said: “The most significant expected advances to create new risk pools and narrow India’s protection gap lie in scaling innovative risk transfer solutions that utilize advanced data, primarily parametric insurance,” Singhal said.
“Parametric insurance, which offers immediate, objective, rules-based payouts triggered by verifiable indices (like wind speed or rainfall), has already been tested successfully in localized instances, such as covering income loss during heat waves.
“Furthermore, Nagaland launched a multi-year, government-backed parametric scheme in 2024.”
Singhal concluded: “Despite the IRDAI permitting such products under the ‘use-and-file’ regime, scalability remains limited by institutional barriers, including low awareness among insurers and state governments and the lack of a unified policy framework that formally recognizes these instruments.
“A global broker, like Howden, uniquely suited to facilitate the necessary data coordination, advise on basis risk minimization strategies, and connect these complexes, layered local risk pools with the global capacity specializing in structured and parametric placements.
“Howden in India has a dedicated Climate Risk (Parametric) practice which focuses on this and we are leading this space.”
Read all our interviews with ILS market and reinsurance sector professionals here.
