Climate change is increasingly shaping economic and social realities worldwide. What was once discussed in distant projections is now influencing everyday risk patterns in multiple regions and sectors.
At COP30 in Belem, Brazil, the report ‘Resilience Now’, co-presented by Marsh McLennan and the Inter-American Development Bank, highlighted the scale of climate-related impacts. In Latin America and the Caribbean alone, losses are estimated at approximately $1.2 million every hour, much of it uninsured. While I am not sure about any cover offered in Pakistan, only about 43 per cent of weather-related damages are covered by insurance worldwide, leaving an annual protection gap of roughly $132 billion. This gap places considerable strain on communities, governments and businesses, reinforcing the importance of transition to strengthen resilience measures, including more effective risk transfer mechanisms.
As COP30 offered constructive examples of how this transition might unfold. Among them was the launch of the ‘House of Insurance’, a platform organised by the Brazilian insurance association CNSeg in collaboration with Marsh McLennan and other partners. The initiative brought together insurers, policymakers, businesses, and civil society organisations to examine how the industry can support the shift towards a low-emission, more resilient economy. A consistent theme emerged: insurance plays a broader role than simply compensating losses after disasters; it can also strengthen resilience and support sustainable development within communities.
The urgency of such reforms becomes stark in light of Pakistan’s recurring climate crises. Floods, droughts, heatwaves, and glacial lake outburst events are no longer anomalies but recurring features of national life. Recent catastrophic floods during 2022 and 2025 displaced millions, destroyed homes, devastated crops, and reversed years of development gains. Yet only a small fraction of those losses were insured. When disaster strikes, families often borrow, liquidate productive assets or depend on overstretched government relief. This reactive cycle is neither sustainable nor equitable. In this context, building a robust insurance culture is not simply a commercial aspiration; it is a public responsibility.
Pakistan requires insurance solutions that are anticipatory rather than reactive and inclusive rather than exclusive. The insurance sector must move beyond narrow urban life policies and embrace climate-linked risk coverage, agricultural protection, micro health insurance, and disaster-responsive instruments. If insurance is to function as an economic shock absorber, it must be redesigned for a warming world.
Reform, therefore, must occur on multiple fronts with governance and transparency sit foundational. Strengthened oversight, adoption of international financial reporting standards such as IFRS 17 (The International Financial Reporting Standards), and implementation of robust risk-based capital frameworks would align domestic insurers with global benchmarks and enhance actuarial credibility. Enterprise risk management systems would allow insurers to anticipate exposure rather than merely respond to it. In a world where investors and donors demand clarity, compliance becomes not a burden but a bridge to opportunity.
Digital transformation is equally indispensable as insurance no longer remains tethered to paperwork-heavy processes and prolonged claim settlements. A mobile-first strategy, AI-enabled underwriting, biometric verifications and streamlined digital claims processing can reduce operational costs while expanding access to rural and informal populations. In the digital age, where time is money, efficiency is survival. The sector must embrace InsurTech innovations not as passing trends but as structural reforms.
Within this reform landscape, the State Life Insurance Corporation of Pakistan carries a particular responsibility. As the country’s flagship public insurer, it must do more than follow trends; it must set them. If State Life adopts a bold reform agenda, it can become a north star for the entire insurance ecosystem.
For this to happen, governance reform is the first step. As a first step, performance-based accountability for senior management and transparent public reporting would strengthen institutional credibility. Pursuing international credit ratings and diversifying reinsurance partnerships would mitigate concentration risks and enhance resilience. By aligning with global solvency and disclosure practices, State Life can demonstrate that public ownership and professional excellence are not mutually exclusive.
Equally transformative is the integration of climate-responsive insurance mechanisms. Parametric insurance, in which payouts are automatically triggered by predefined weather thresholds, offers a promising solution for flood and drought-prone regions. Satellite data and meteorological indices can facilitate compensation within days rather than months, enabling farmers and small businesses to recover swiftly. In such innovation lies the difference between resilience and ruin. When disaster strikes, rapid response can ensure communities stay afloat rather than sink like a stone.
Another imperative is to embed a national climate insurance facility within State Life, which could further attract international climate finance. Donor-backed guarantee funds, catastrophe bonds and blended finance structures could distribute risks while expanding coverage for vulnerable populations. By positioning itself as a climate resilience partner, State Life could tap into adaptation and loss-and-damage funding streams. This would generate additional revenue while integrating Pakistan more deeply into the global climate finance architecture.
Inclusive product expansion is another priority. Microinsurance tailored to daily wage earners, smallholder farmers, freelancers and women-led enterprises can significantly expand the protection net. Low-premium health and life policies distributed digitally would reduce overhead while advancing social protection goals. Likewise, partnerships with social safety net programmes such as BISP, Pakistan Bait-ul-Maal and provincial health departments can ensure that vulnerable communities are not left behind. At its best, insurance reflects the principle of ‘pacta sunt servanda’. Trust between the insurer and the insured rests on this contractual and moral commitment.
While innovation must also become institutionalised, establishing a dedicated climate risk analytics unit would refine pricing models using geospatial data and predictive analytics. In this vein, collaboration with universities, meteorological institutions and international reinsurers would deepen technical capacity. Exploring a partial market listing of a minority stake could enhance transparency while retaining public ownership. Reform, in this sense, strengthens rather than dilutes national interest.
Ultimately, the evolution of Pakistan’s insurance sector depends on restoring public confidence. Insurance should not appear as a distant corporate product but as a shared shield against uncertainty. Streamlined claims, prompt payouts, and transparent communication can rebuild credibility. When citizens experience fair treatment and efficient service, word of mouth can spread like wildfire, reshaping perceptions of risk management.
In an era marked by climate shocks and fiscal constraints, insurance cannot remain a passive bystander. It must become a proactive instrument of resilience, inclusion and economic stability. The reforms required are ambitious but achievable. They demand vision, political will and institutional courage. The alternative, continued vulnerability and reactive relief, is far more costly.
If State Life rises to this challenge, it can guide the sector from uncertainty to opportunity. By modernising governance, embracing digital transformation, integrating climate-responsive instruments and attracting international partnerships, it can evolve from a traditional insurer into a national resilience platform. In doing so, it will not merely keep pace with global practices but chart a path rooted in Pakistan’s realities, transforming insurance from an afterthought into a cornerstone of sustainable development.
The writer is a climate governance expert. He can be reached at: [email protected]
