First payout to flood victims in Bangladesh

In 2013, we worked with several partners from the public and the private sector to develop a pioneering scheme in Bangladesh that offers insurance protection against flood damage to NGOs and other organisations so they can provide support to vulnerable low income households. Bangladesh is particularly vulnerable to periodic flooding, because it receives water from a drainage area 12 times its own size. This has had devastating consequences for the the country’s development and has been one of the main reasons for its widespread and persistent poverty.

The programme insures 1 660 families in 14 villages located in the Char areas of the Sirajganj district. When the floods of August and September 2014 hit the region and caused massive damage in several villages, the programme was triggered for the first time. More than 700 families received a total of USD 25 000 in compensation, which enabled them to start rebuilding their lives and avoid desperate emergency measures.

By using an index-based solution, the programme has managed to meet two challenges at the same time. Building a fully-fledged flood hazard model would have been time-consuming and expensive, because there were no flood loss data for the area. Instead, the Bangladesh-based Institute of Water Modelling (IWM) built a simple model based on flood water level/depth and flood duration. This automatically triggers the payment of an insurance benefit and determines the households that are eligible for the payment, ensuring they receive compensation quickly.

We support the programme by reinsuring the risks and by offering product structuring support, pricing and underwriting.