Parametric insurance expansion recommended for small entrepreneurs facing climate risks
Climate change-induced floods, landslides, droughts and unseasonal rains have severely affected Nepal's small agricultural and tourism entrepreneurs. A study report published by the United Nations Development Programme (UNDP) and the Nepal Insurance Authority recommends widespread expansion of technology-based parametric or weather index-based insurance.
Kathmandu. Unforeseen natural disasters triggered by climate change — unseasonal rains, droughts, floods and landslides — are devastating Nepal's small agricultural and tourism entrepreneurs.
According to a study, 24 percent of businesses in the agricultural sector are directly affected by floods and 21 percent by landslides. In the tourism sector, businesses come to a standstill when road networks are damaged. To address this, a study report published by the United Nations Development Programme (UNDP) and the Nepal Insurance Authority recommends widespread expansion of technology-based parametric or weather index-based insurance.
The report concludes that if a system of automatic claim payouts without paperwork — triggered as soon as rainfall or drought exceeds a specified threshold based on satellite and weather data — can be implemented, small entrepreneurs exposed to climate risks would receive immediate relief.
The report indicates that the government, the regulatory body Nepal Insurance Authority and insurance companies must work in an integrated manner to bring Nepal's small business and enterprise sector under the insurance umbrella. The report primarily presents the following solutions and recommendations:
- Separate small enterprise insurance structure: Policymakers should introduce special insurance policies and schemes targeting small entrepreneurs.
- Simplification of claim payment process: Ensure fast and simple claim payments by adopting digital technology.
- Digital distribution and satellite technology: Extend insurance access to the last mile through digital wallets, telecom and agricultural apps.
- Subsidies and premium grants: Settle the arrears of agricultural insurance subsidies provided by the government in a timely manner and offer discounts on premiums for small entrepreneurs.
- Literacy campaign: Raise awareness about simple insurance policies and claim processes in local languages.
The English-language study report titled "Risk and Insurance Protection Gap of Small Enterprises in Nepal 2025", published by UNDP and the Nepal Insurance Authority, highlights that since small enterprises have been making significant contributions to Nepal's economy, appropriate insurance protection is necessary for their safeguarding.