New Delhi: With India incurring losses to the tune of $9-10 billion annually due to extreme weather events, the second volume of the Economic Survey 2016-17 released on Friday pitched for climate insurance instruments.

India is among the world’s most vulnerable countries to climate change. Of the estimated $9-10 billion loss every year, nearly 80% remain uninsured.

The survey said innovative products supported by risk models and reinsurance pools can provide a huge opportunity to the insurance industry.

“One such model is that of Catastrophe Risk Pool (CRP) that aims to put the focus on proactive financial planning to deal with adverse impacts of natural disasters, instead of relying on fund-raising efforts after disasters, resulting in reduced economic losses as well as lowering the impact of disasters on the national budget," the survey said.

India’s non-life insurance market more than tripled in a 10-year period, growing from $3.4 billion in 2004 to $13.5 billion in 2015. But India remains a significantly under-penetrated insurance market.

The survey said low insurance penetration in India was evident from data on recent calamities, a case in point being the 2014 Kashmir floods.

While the total losses caused by unprecedented rains were in excess of Rs1 trillion, insurance companies were required to pay only around Rs4,000 crore because of low insurance coverage.

And while total losses from 2014’s Cyclone Hudhud, which hit the south-eastern coast of India, were to the tune of $11 billion, $650 million was the extent of the tab that insurers had to bear.

In India, climate-related insurance is limited to the agriculture sector, primarily in the form of crop insurance.

Experts welcomed the Economic Survey’s proposal.

“We have been highlighting the importance of doing climate risk assessment and understanding the financial exposure of investment in infrastructure. Signal in the Economic Survey that climate insurance is preferable to fund-raising (after a disaster) is welcome and we hope that government and insurance companies will take this forward," said Arunabha Ghosh, chief executive officer of the Council on Energy, Environment and Water (CEEW), a Delhi-based climate think tank.

The suggestion in the survey comes at a time when India has taken the lead as a climate and sustainability leader with initiatives such as the International Solar Alliance (ISA) of 121 countries.

“We need to have a rational approach that balances environment, climate, economic development and energy security needs. We need to concentrate on cleaner forms of energy including cleaner coal, renewables and natural gas to fuel inclusive economic development," the survey said.