Experts say India must introduce catastrophe bonds to manage rising disaster costs, and the situation in Himachal Pradesh shows how urgently this is needed.
Disaster and Economic Stress
Himachal Pradesh has faced repeated climate disasters in recent years. Extreme rain, flash floods, landslides and cloudbursts have destroyed roads, bridges, homes and farms across the state. The 2023 monsoon alone caused losses of more than ten thousand crore rupees and pushed hill communities into long-term economic distress. Many districts experienced multiple landslides in a single week, showing how fragile mountain ecosystems have become.
Himachal and Disaster
These kinds of disasters are no longer rare. India, like Himachal, is highly exposed to extreme weather — heatwaves, floods, droughts, cyclones and earthquakes. Studies show India is one of the world’s most vulnerable countries. The financial impact of these disasters is increasing faster than the government’s ability to fund relief and reconstruction.
Today, most disaster recovery funds come from government budgets. Himachal receives support from the National Disaster Response Fund, but it is often not enough or comes late. The state has no dedicated disaster-financing mechanism of its own, and rebuilding after major damage takes years.This is where catastrophe bonds or “cat bonds” can help.
What is Cat Bonds and How it Can help Himachal in Disaster
Cat bonds shift natural disaster risks from governments to global investors. Investors earn high interest, but they lose their money if a big disaster occurs. If no disaster happens during the bond period, they receive strong returns. This system allows governments to raise large funds quickly after a disaster, without waiting for budget approvals.
Countries like Japan, Mexico, the US and several Caribbean nations already use cat bonds to pay for earthquake, hurricane or flood losses. The global market for cat bonds is worth over sixty billion dollars.For India, and especially hill states like Himachal Pradesh, cat bonds could provide a strong financial cushion. Landslides, flash floods and cloudbursts happen suddenly and cause extremely high damage. A well-designed cat bond, triggered by rainfall intensity or landslide frequency, could release money immediately when such events occur.