SEWA Shows How Parametric Insurance Can Fill a Protection Gap and Build Resilience

Last year, the global economy suffered economic losses worth $368 billion from weather-related events, as hurricanes, floods and prolonged heatwaves hit regions around the world. Only 40 percent of these losses were covered by insurance, highlighting a $223-billion gap that leaves low-income workers, such as women in agriculture and construction labor, particularly vulnerable to catastrophic events. A host of structural barriers—from unaffordable insurance premiums to limited financial literacy to living in remote areas—excludes seasonal and informal sector workers from traditional insurance. This is where parametric insurance has emerged as a transformational solution to simultaneously increase financial inclusion and build climate resilience.

An organization seeing encouraging results from piloting parametric insurance is SEWA, or Self Employed Women’s Association, an Indian labor organization with a membership of more than 3 million self-employed women workers from the country’s vast informal economy. “We are daily-wage workers and I am the sole breadwinner in my family. During the days of extreme heat, my work hours decrease, which leads to decreased income. This year, the funds will be used to buy books and pay school fees”, said SEWA member Hasinabibi, a home-based worker in the city of Ahmedabad who received an insurance payout triggered by India’s punishing heatwave.

At the same time, this model does not see Hasinabibi and others as just passive recipients of relief — but as active co-producers of insurable value. Reports indicate that the Indian government and insurance industry could collaborate on a nationwide parametric insurance scheme, potentially making India the first large economy to provide this social protection to workers.

SEWA’s innovative parametric microinsurance scheme for its members started as part of the global ‘Extreme Heat Income Insurance’ program. funded by the Atlantic Council’s Climate Resilience Center (formerly the Adrienne Arsht-Rockefeller Foundation Resilience Center) to address health-related risks from extreme heat faced disproportionately by marginalized women and girls. This year, the program scaled up in partnership with the Climate Resilience for All. The domestic insurer for the heat-linked insurance scheme is ICICI Lombard, a leading Indian general insurance company.

As interest in parametric insurance continues to rise, SEWA members led a multi-stakeholder roundtable at the Clinton Global Initiative during Climate Week NYC 2025 recently to share learnings from its pilot and explore how blended finance can scale inclusive climate resilience solutions across the Global South.

What is Parametric Insurance?

Parametric insurance, also known as event-based or index-based insurance, is a risk transfer solution where payouts are triggered by a specific, pre-defined event rather than the actual amount of loss or damage incurred. Unlike traditional insurance, which requires a lengthy claims assessment process, parametric insurance relies on independently verified third-party data sources to confirm if a predefined index or parameter has been met. These triggers are based on measurable indicators such as temperature, wind speed, wave height, or rainfall. When a triggering event occurs, the fast and flexible payout offers immediate liquidity to the clients, with the freedom to use the funds as they see fit.

In 2025, SEWA’s microinsurance product covered 225,000 members from seven states and 34 districts up from 21,000 in 2023 when the program began. The farmers, salt pan workers, waste recyclers, street vendors, construction workers, home-based workers, and others who have benefitted from the program have used the payouts for a wide range of needs, such as paying children’s tuition fees and buying medicines, groceries, and seeds. An intervention like parametric insurance recognizes that extreme weather events not only lead to lost incomes, but also have adverse impacts on health, children’s education, and food security of workers with precarious livelihoods.

Collectively, in the past year, SEWA’s members received insurance payouts worth $350,859, when the temperature breached the pre-determined threshold of 41.6°C- 46.1°C for a minimum of two consecutive days. Members also received direct cash assistance adding up to $240,096 at the lower temperature threshold of 40°C. SEWA’s focus groups show members’ openness to paying premiums – a sign that such programs offer potential to scale up with less reliance on subsidies and philanthropic grants once they demonstrate their benefits and raise financial literacy.

Why it is Timely to Scale Parametric Insurance

The insurance protection gap is particularly wide in emerging markets where coverage estimates are as low as 1-10%. Case studies from around the world show that parametric insurance programs are building resilience in diverse communities, offering protection to farmers in Malawi from drought, communities in Fiji from tropical cyclones, and wind farms in Viet Nam during low-wind periods. At the same time, parametric solutions are also filling an acute need in developed economies, as shown by the flood insurance program in California, supported by the AI platform Floodbase, which offers protection against previously uncovered losses from atmospheric river flooding.

Parametric offerings are receiving greater attention from traditional insurers facing the high costs of catastrophic events and asset managers interested in products whose risks are uncorrelated with stock market performance. As a result, the global parametric insurance market is expected to grow rapidly, with one estimate projecting it to cross USD 40 billion by 2033. With technology providing the backbone for these products, there is optimism that AI advancements will further improve the accuracy of pinpointing the triggers, pricing the solutions, and lowering the basis risk (the risk of payout falling short of the actual loss experienced by the insured).

Parametric solutions are not all about the payout. Forward-looking data-driven insights about environmental factors, like temperature trends and humidity levels, can also be used to implement preventive measures to safeguard operations and protect the workforce. SEWA has integrated distribution of various wrap-around climate adaptation interventions to protect members during periods of extreme heat. All women enrolled in the pilot have received interventions such as solar lights and insulated water jugs. The organization believes that climate insurance should be embedded in a broader menu of financial services, including savings and grants, as well as non-financial services like climate health, mental health, climate adaptation, and early warnings—to collectively enable the working poor to manage diverse risks.

More Work Ahead

Crucially, SEWA’s innovative program highlights the need for designing better parametric insurance products – a goal that must be front and center of ongoing efforts to scale the parametric insurance ecosystem. The pilot program’s sole parameter for triggering payouts was the maximum daily temperature, overlooking related factors such as humidity and nighttime temperatures and excluding other climate-shocks like unseasonal rains, hailstorms, and cyclones. Moreover, the trigger temperatures set for the product in 2023 were so high that members did not receive a payout, despite the year emerging as the hottest on record. “These intense climate shocks underscore the need for an all-weather, catastrophe insurance product with dynamic risk assessments and more realistic trigger mechanisms to help members cope with the escalating climate volatility,” says Reema Nanavaty, Director of SEWA.

Parametric insurance is relatively new, and measuring its impact is challenging due to diverse applications, infrequent severe events, and the distance between insurers and the insured. The United Nations Development Programme’s Insurance and Risk Finance Facility (IRFF), launched in partnership with insurer Generali, to incentivize the development of innovative insurance solutions for building financial resilience, recommends defining specific KPIs (e.g., reduced vulnerability, increased understanding of parametric insurance, greater productivity, improved investment climate, and supportive policy environment) to measure impact and guide product improvements.

SEWA envisions that future iterations would integrate women workers not just beneficiaries of AI-driven models but co-designers of them. By leveraging participatory data systems, hyperlocal sensors, and women-led digital observatories, SEWA aims to democratize data ownership

For a world reeling from climate shocks that disproportionately impact low-income earners who did not contribute to the crisis, parametric insurance is a promising approach to risk management. It represents a much-needed shift from reactive to proactive solutions that are flexible enough to meet diverse needs when lives and livelihoods are disrupted by extreme-weather events. Lessons learned from SEWA’s program are informing parametric solutions for places like Sierra Leone and Pakistan , and are even being used to build support for similar programs for outdoor workers in hot American cities. Active problem-solving and collaboration from all stakeholders—governments, insurers, investors, fintech and AI startups, and civil society organizations representing workers—will help to realize the potential of parametric insurance in increasing financial inclusion and building resilient communities.