An Analysis of Legal Implications of Climate Change on the Insurance Sector in India

Abstract

Climate change poses significant challenges to the insurance sector, impacting risk assessment, policy pricing, claims management, and regulatory compliance. In India, the increasing frequency of extreme weather events such as floods, cyclones, and droughts has heightened the demand for climate-responsive insurance policies. This article examines the legal implications of climate change on the Indian insurance industry, focusing on regulatory frameworks, evolving liability concerns, and the role of insurance in climate risk mitigation. It explores key legal provisions under the Insurance Regulatory and Development Authority of India (IRDAI), environmental laws, and global best practices. Additionally, the article highlights the need for legal reforms to enhance climate resilience, including mandatory climate risk disclosures, parametric insurance solutions, and government-backed climate risk pools. The discussion also extends to the role of litigation in holding insurers and industries accountable for climate-related losses. As India moves towards a sustainable future, a robust legal framework and proactive policymaking are crucial to addressing the intersection of climate change and insurance. Furthermore, the role of climate litigation is examined, particularly in holding insurers, corporations, and governments accountable for climate-related losses and insufficient coverage. The article also delves into the challenge’s insurers face in pricing climate risks accurately and balancing financial sustainability with consumer protection. As India moves towards a sustainable future, a robust legal framework, proactive policymaking, and collaborative efforts between regulatory authorities, insurers, and policymakers are essential in ensuring that the insurance sector can effectively address the growing risks posed by climate change.