New panel on disaster management, insurance

• Development of strategies and approaches related to insurance and risk assessment in the context of climate change and extreme weather events in various sectors

• Preparation of an approach paper on the theme ‘Climate Change and Insurance’

The terms can include any items related to the above.

The World Bank had earlier warned that natural disasters pose a major threat to India’s economic development, inflicting losses amounting to $13.8 billion during 1996-2001 and eroding two per cent of GDP.

Changes in climate have the potential to affect the geographic location of ecological systems, the mix of species that they contain, and their ability to provide the wide range of benefits on which socio-economic life depends. “Of India’s 31 states, 22 are regarded as being particularly disaster-prone. About 55 per cent of the country’s land is vulnerable to earthquakes, eight per cent to cyclones and five per cent to floods,” said the Bank’s senior insurance officer Eugene N. Gurenko in his report on India.

Disasters erode two per cent of GDP and 12 per cent of government revenues. The World Bank had criticised the government for inadequate disaster management mechanism and proposed further liberlisation of insurance market to enable public and private insurers to take care of such colossal risks.

“The constitution does not directly specify which level of the government is responsible for managing disasters,” the report had said, adding the Centre was financing catastrophe relief efforts through “margin money” allocated to the states from the successive finance commissions.

The bank had, however, lauded the Eleventh Finance Commission’s recommendation for a greater role of insurers and creation of a National Centre for Calamity Management (NCCM) to provide advice to the government on financing of calamity recovery efforts.

The Insurance Regulatory Authority of India (Irda) favours a unified law for managing disasters. It has said it will discuss with insurers a mechanism whereby municipalities could be empowered to collect premium for covering risks associated with major calamities under a unified legislation for disaster management.

In view of the current division of responsibilities between states and the Centre, it is suggested that there is a need to create a body of legislation dealing with response to natural disasters and other emergencies, clearly delineating responsibilities and powers of each entity and specifying what powers or actions would need to be activated on declaration of a disaster by government.

There is a need to create an “insurance pool” for disaster management. In this context, Gurenko had said insurers should be allowed to create a catastrophe reserve and exempt it from tax.