Bangladesh flood victims benefit from first index insurance payout
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Members of more than 700 households in Bangladesh are rebuilding their lives thanks to an Oxfam flood insurance scheme triggered for the first time. Swiss Re provided reinsurance cover for the plan.
The floods in August and September 2014 created significant damage in several villages in the Sirajganj district of Bangladesh. As a result, more than 700 families in four regional villages - Boro Chouhali, Choto Chouhali, Fulhara East and Muradpur - will receive BDT 1,982,400 (USD 25,000) to rebuild their lives.
Harini Kannan, Swiss Re Head Agriculture, South West Asia, says studies show that flood-affected rural communities often deal with short-term shocks by adopting extreme coping mechanisms, including high-interest short-term loans, or selling life-essential assets such as cows and goats. "With insurance, victims of extreme flooding can rely on funds coming in to get back on their feet."
Partnering to provide cash for speedy relief and reconstruction
The index-based Bangladesh Flood Insurance scheme was launched in 2012 by the international development agency Oxfam. Involving several private sector and meso-level institutions focused on disaster preparedness, the scheme aims to tackle the impacts of catastrophic flood by building community resilience and providing timely compensation to flood victims for speedy relief and development interventions. 1660 poor and vulnerable households in 10 villages located in the river basin areas of Sirajganj district are currently covered by the index-based flood insurance scheme to improve disaster risk reduction in this flood-prone region.
A beneficiary of Oxfam's first index insurance payout. (Photo: Oxfam)
How it works
This product is index-based and operates at the meso-level, which means that payout is triggered on the basis of water depth and duration of flooding. Manab Mukti Sangstha (MMS), the official NGO policy holder, receives compensation at the end of the monsoon season, and then distributes the funds to the households that fall within the compensation criteria.
The scheme was started following a research study conducted by Oxfam and the India-based Center for Insurance and Risk Management (CIRM), for developing flood insurance in Bangladesh. The flood hazard model, designed by the Bangladesh-based Institute of Water Modeling (IWM) is used to generate flood data, while the Swiss Development Corporation (SDC) finances the project. The Pragati Insurance Ltd. (Bangladesh) plays the role of insurer, while Swiss Re (the Swiss-based reinsurance company) provides re-insurance cover.
The beneficiaries received their allocated compensation on 31 October from MMS. Oxfam’s Country Director in Bangladesh, Snehal V. Soneji said, "This is a milestone event in the history of floods in Bangladesh. While seemingly a small step in the broader scheme of things, it will make a very real difference to the lives and prospects of several hundred people in the region. With time, we're hoping the concept will be scaled up, and provide a more hopeful future for all those vulnerable to extreme flood risk in Bangladesh."
Published 31 October 2014