India’s Rapid Infra Growth Risks Outpacing its Ability to Insure These Projects: Report

On one hand, India is rapidly growing as an economy, which is driving infrastructure expansion. On the other hand, rising climate risks may be outpacing the country’s ability to insure these assets, according to a new report released by Climate Trends.

The analysis found that the probable inability to insure these infrastructure assets potentially exposes governments and investors to growing financial stress. The report drew on the extreme weather events faced by India in 2025, especially hydro-meteorological events,  to support its findings. 

According to the report, flooding, extreme rainfall, cyclones, and landslides were identified as high to very high risks for capital-intensive infrastructure such as urban assets, highways, ports, and hydropower projects, driving repeated losses and rising insurability concerns.

The report found 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. 

Growing uncertainty

Rising climate risks are threatening infrastructure and insurable properties worldwide. The report found that rising climate losses are straining insurance sustainability. In FY2024-25, global insured property losses exceeded $140 billion, while India’s 2023 natural catastrophes losses reached $12 billion. Both figures were significantly higher than the previous decade’s average. 

In India, the states of Assam, Andhra Pradesh, Odisha, Uttarakhand, Himachal Pradesh, parts of Ladakh, Sikkim and the north-east were categorised as more vulnerable than the rest of the country, according to the report. It also found that some of the largest infrastructure projects, investment-wise, are also situated in these vulnerable regions. Total investments in infrastructure currently amount to Rs 2.95 lakh crore. 

According to the report, India’s infrastructure spending now exceeds 3% of GDP. Also, 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 reinsurer Swiss Re.

With the increased intensity and frequency of extreme weather events, climate impacts are becoming more frequent and predictable. This is making some regions nearly uninsurable, found the report. This, in turn, makes it difficult to price climate risk, and widens the gap between insured and actual losses.

“Investing in new infrastructure is essential to driving growth. However, the heightened climate vulnerability needs regular discussions, especially on the risks to the CAPEX-heavy undertakings in the eastern sections of the country. Ensuring that they incorporate long-term resilience to extreme weather events could save millions in post-disaster reconstruction, and thereby lend them affordable premiums much further into their operational lifetimes,” said Aniruddha Bhattacharjee, lead author of the report.

Speaking with multiple insurance companies like SBI General Insurance, Munich Re India, Swiss Re India, and General Insurance Corporation of India, the report’s authors found that climate risk is now a core insurance concern. 

According to the report, all insurers said climate impacts are a high-risk factor for long-term profitability, even while climate insurance is a growing subset in the insurance business. 

Also, existing risk models cannot adequately capture evolving climate risks. This can potentially lead to data gaps, modelling uncertainty, and a widening protection gap. For infrastructure, especially, two-thirds of the insurers reported rising premiums since 2015. 

To sum up, climate insurance is a growing field and innovation is happening. There now exists parametric and climate-responsive insurance for floods, cyclones, heat, and rainfall, but no coverage yet exists for cloudbursts and landslides. The whole of climate impacts needs to be brought under the ambit of climate insurance, the report concluded.

“One of the primary challenges we see as a non-life insurer is pricing premiums under deep uncertainty. The long-term damage from extreme events remains difficult to quantify, and this has contributed to a persistent protection gap between the economic and insurable losses. Addressing this will require more effective risk-sharing tools, clearer loss data, and closer coordination across insurers, reinsurers, the regulator and the parties affected. It is hoped that doing so will help identify solutions to manage India's climate risk with sustainable and affordable insurance,” said SBI General Insurance.