Floods in South Asia Expose Rising Hydropower and Infrastructure Risks, What Is the Insurers' Perspective?
Recent floods in South Asia have exposed interconnected natural catastrophe risks in hydropower, infrastructure, and construction projects. According to Aon, global economic losses in 2025 could reach $260 billion, while insurable losses were $127 billion. Insurers are urged to adopt a forward-looking approach to risk assessment.
Kathmandu. Recent floods in South Asia have exposed the complex natural catastrophe risks faced by hydropower, infrastructure, and construction projects. This is especially true where damage to one asset can disrupt interconnected facilities and recovery can take a long time.
According to Alex Davis, Director of Natural Resources for Asia at Aon, recent floods in South Asia have exposed the complex risks faced by hydropower, infrastructure, and construction projects globally.
"While it is too early to estimate the insurable impact of this event, it underscores the importance of understanding how natural catastrophe risk can affect critical infrastructure assets and the communities and economies that depend on them," he said.
Hydropower projects rely on interconnected assets including dams, tunnels, transmission infrastructure, access roads, and auxiliary facilities. This means that damage to even one component can have widespread consequences for operations, supply chains, and recovery timelines.
"Recent events have shown that damage to even one element of that network can have widespread consequences for a project's operations, supply chains, and recovery timelines," Davis said. "When assessing risk and resilience in major infrastructure projects, insurance companies are increasingly considering these broader interdependencies."
The broader disaster risk environment is also changing. Aon's '2026 Climate and Catastrophe Insight' report states that global economic losses from natural disasters in 2025 could reach $260 billion, while insurable losses were $127 billion. This is 27 percent higher than the 21st-century average.
The report also identifies a global protection gap of 51 percent.
"From an insurance perspective, such events reinforce the need for a forward-looking approach to risk assessment," Davis said. "Historical loss data must be incorporated alongside climate science, catastrophe modeling, engineering analysis, and asset-specific risk assessment."
Davis said insurability is increasingly determined before a project reaches the insurance market.
"Decisions made during feasibility, site selection, engineering design, procurement, and construction planning can affect loss outcomes, lender confidence, and future insurance market appetite," he said.
Data, modeling, scenario analysis, and stress testing can help institutions assess climate-related physical risks and inform decisions related to project design, financing, and risk transfer.
Moreover, incorporating risk engineering, climate analysis, and insurance advice early on can strengthen long-term viability and project confidence. –Agency