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India has stepped up its infrastructure drive, with capital expenditure on roads, ports, energy, and urban projects now exceeding 3% of the country’s gross domestic product. But a new analysis suggests that rising climate risks from floods, cyclones, landslides and extreme heat are increasingly damaging critical assets and driving up insurance costs. Experts warn that without stronger climate resilience in planning and design, parts of the country’s infrastructure could become difficult to insure, creating financial risks for governments, insurers and investors.
The report, titled Climate Risks and Insurance for India’s Infrastructure and prepared by Climate Trends, finds that climate impacts in India are no longer rare events but are steadily increasing in both frequency and severity. As infrastructure builds up faster than systems to manage climate risk, insurance models are struggling to price these risks accurately. Many insurers say existing methodologies fail to capture the rapidly evolving situation.
Infrastructure Expansion Meets Environmental Vulnerability
India’s infrastructure expansion is progressing most rapidly in regions that are also highly exposed to climate hazards such as flooding, extreme rainfall, coastal storms and landslides. The report highlights states including Assam, Andhra Pradesh, Odisha, Uttarakhand, Himachal Pradesh, Sikkim, Ladakh and parts of the Northeast as areas facing significant risk, even as major investments are concentrated there.
In these regions, the total value of infrastructure projects at risk, spanning ports, tunnels, highways and hydropower installations, is estimated at nearly Rs 2.95 trillion. Flooding and hydro-meteorological events have dominated India’s climate impact calendar in recent years, with damages repeatedly affecting transport networks, urban infrastructure and energy assets.
High Premiums and Insurance Challenges
Interviews with insurers and reinsurers across the country, including major players such as SBI General Insurance, Munich Re India, Swiss Re India and General Insurance Corporation of India, reveal growing stress on climate risk pricing. Around two-thirds of those surveyed reported that premiums have climbed since 2015. All insurers noted that rising costs are putting pressure on the affordability of insurance for infrastructure projects, particularly hydropower assets in flood and landslide zones.
Insurers also said uncertainty about future climate trends makes it harder to underwrite long-term infrastructure risks. This could lead to gaps in coverage or force developers to shoulder more risk themselves. Analysts say that without better models and more standardised approaches to risk disclosure and loss assessment, insurance may become difficult to secure for some assets.
Regulatory and Fiscal Implications for India
The report raises questions about the role of the Insurance Regulatory and Development Authority of India in encouraging deeper insurance penetration while managing new and complex climate-linked risks. India’s non-life insurance penetration remains low at about 1%, well below global averages, even as climate damage and related losses rise.
For the finance ministry, the analysis points to a possible rise in contingent liabilities. With more assets at risk and the potential for uninsured losses, disaster relief, reconstruction and fiscal guarantees may increasingly rest on public funds. Experts say embedding climate resilience into infrastructure planning from the earliest stages would help reduce long-term costs and insurance uncertainties.
References:
https://tribe.t8np75rys.junction.express/uploads/2026/01-January/23-Fri/combined_6973996d422f9.pdf
Banner image: Photo by Dibakar Roy on Unsplash
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