A columnist in The Express Tribune argues that in Pakistan, the risks of recurring monsoon floods are insufficiently accounted for in insurance, bank lending and real estate valuation. In his view, the country needs financial mechanisms that would make it possible to distribute climate risks rather than place losses primarily on affected households.
According to estimates cited in the column, the 2022 floods caused Pakistan $14.9 billion in damage, while broader economic losses reached $15.2 billion. This amounted to approximately 4.8% of the country’s GDP in one season. The housing sector suffered the greatest damage, at $5.6 billion, while agriculture, livestock and fisheries lost $3.7 billion.
The most vulnerable sectors
The author notes that the agricultural sector accounts for about a quarter of Pakistan’s GDP and employs half of the workforce, yet crop insurance is hardly widespread there. He identifies districts in Sindh province as particularly vulnerable; they accounted for nearly 70% of total damage and losses in 2022.
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According to the author’s assessment, banks lend against real estate in flood-prone areas on terms similar to those for properties outside such territories. Insurers, where their services are available to ordinary households, treat monsoons more as a background weather phenomenon than as a modeled risk.
Proposed mechanisms
The column proposes developing parametric insurance for small farmers: payouts under such policies should be triggered automatically by rainfall or water-level indicators, without lengthy consideration of insurance claims. Similar models, according to the publication, are already being tested in Bangladesh and some East African countries.
Other proposed steps include differentiated lending terms for property and agricultural production in areas with a high flood risk, as well as the creation of a domestic market for catastrophic risk insurance. Reconstruction needs after the 2022 floods were estimated at more than $16 billion. The article also notes that more than 70% of the country’s workforce is employed in the informal sector and is mostly not covered by the formal social protection system.
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