India Moves Toward Insurance-Linked Securities To Strengthen Climate Resilience

India’s insurance sector is set for a major transformation with the proposed introduction of insurance-linked securities (ILS). These financial instruments, already popular in global markets, enable insurers to transfer risks such as natural disasters and climate-related events to capital market investors.  

The move comes as India faces increasing exposure to climate change and catastrophic risks. By adopting ILS, insurers can reduce their vulnerability, while investors gain access to a new asset class that offers diversification and potentially attractive returns.  

Regulators are working on a framework to ensure transparency, investor protection, and compliance with international standards. Industry experts believe that ILS will not only strengthen India’s insurance ecosystem but also attract global capital, supporting infrastructure resilience and long-term sustainability.  

Key Highlights  

• India to introduce insurance-linked securities for risk diversification  
• ILS transfers catastrophe and climate risks to capital markets  
• Provides insurers with resilience and investors with new opportunities  
• Regulatory framework under development for transparency and compliance  
• Expected to attract global capital and support sustainability goals  

Sources: Economic Times, Mint, Business Standard