Climate risks should be mitigated through insurance, experts say

Industry experts have called for stronger collaboration between the government and the insurance industry to mitigate the growing impact of climate and catastrophe risks, warning that the scale of potential losses is beyond the capacity of the country’s insurance industry to bear alone.

Speaking at a panel discussion on Climate and Catastrophe Insurance during the 1st International Insurance Conference in Karachi, representatives from the insurance and reinsurance sectors stressed that Pakistan remains highly vulnerable to climate-related disasters and requires a comprehensive risk-sharing mechanism involving the government, insurers and international reinsurers.

Managing Director and CEO of Jubilee Life Insurance Javed Ahmed said Pakistan has suffered average annual crop losses of around $1.3 billion over the past decade due to climate change. However, the magnitude of these losses is beyond the underwriting capacity of the local insurance industry without active government support.

He noted that the country incurred crop losses exceeding $3 billion following devastating floods last year. The amount, he said, was nearly three times the total annual insurance premium generated by Pakistan’s insurance industry, underscoring the need for a national risk-sharing framework.

He also identified low public awareness as one of the biggest challenges facing the insurance industry. The insurance companies paid more than Rs300 billion in claims last year. “Insurance should not be viewed merely as an expense. It is a financial tool for managing risk, protecting future goals and improving financial security,” he said.

Kamran Arshad Inam, Chief Executive Officer and Managing Director of EFU General Insurance, said, “Pakistan needs a national insurance pool comprising the government, private insurance companies and international reinsurance firms to effectively manage climate-related risks”.

He said the collaborative model has already delivered positive results in recent years, citing Sindh’s mandatory third-party motor vehicle insurance scheme as an example of successful cooperation between the public and private sectors.

Johan Thorpe, Senior Vice President at Guy Carpenter, said the government’s role in promoting insurance penetration should be strengthened, while the regulator should be further empowered to safeguard policyholders’ interests and improve transparency, confidence and trust in the insurance ecosystem.

He added that, alongside climate-related threats, cyber risk has emerged as another major global challenge as cyberattacks and online fraud continue to increase. Pakistan, he said, must also develop stronger cyber insurance and risk management mechanisms.

He urged insurance companies to simplify their products and claims processes by leveraging artificial intelligence and digital technologies to enhance efficiency, transparency and customer experience.

Hatim Maskawala, Chief Executive Officer of Badra Management Consultancy, said Pakistan’s insurance industry continues to face several structural challenges, including low public trust, religious concerns and weaknesses in documentation and record-keeping.

He noted that while insurers are increasingly embracing digital channels, the lack of reliable documentation for business assets often makes commercial insurance underwriting difficult.

To strengthen public confidence, he said, both conventional insurance and Takaful operators must ensure timely settlement of claims and consistently honour their commitments to policyholders.