Pakistan floods (2022)

From June to October 2022, the monsoon in Pakistan delivers several times the normal amount of rain, worsened by glacier melt in the north after a spring heatwave. A third of the country is under water, 33 million people are affected, 1,739 die, nearly two million homes are destroyed or damaged, and cotton, rice and sugarcane crops are heavily hit. The World Bank assesses damage at about 15 billion dollars and economic losses at about 15 billion more. The insured loss is very small, of the order of a few tens of millions: Pakistan has no flood insurance scheme, the penetration rate of property insurance is very low, and the loss falls on the state, households and international aid. It is an extreme example of the climate protection gap. It served as an argument, at the Sharm el-Sheikh climate conference in November 2022, for the idea of a loss and damage fund, and for relaunching climate risk financing mechanisms for vulnerable countries: regional pools, sovereign parametric insurance, climate resilient debt clauses. For reinsurers, it illustrates a risk of high frequency and severity in markets with no product, and the need to find a trigger and a payer before the event, not after.