Himalayan Infrastructure Faces Rising Insurance Costs After Nepal Floods

Insurance costs for infrastructure projects across the Himalayas are likely to climb following the catastrophic floods that struck the Nepal-Tibet border in late August, as insurers and reinsurers reassess the region's climate risk profile.

The disaster, triggered by a glacier collapse, swept away more than 11 hydropower plants and destroyed roads and other infrastructure, killing nearly 1,200 people. Thousands remain missing. While final loss estimates are still pending, commercial insurance losses are pegged at over $132.3 million.

According to three people familiar with the developments, insurers and reinsurers are now deliberating on the extent of the damage and what it implies for risk across the Himalayan region. The final premium pricing for projects will hinge on the availability and cost of reinsurance capacity, they said.

A precedent exists. After the less severe 2023 Sikkim glacial lake outburst flood (GLOF), insurance rates for roads and bridges rose by about 21%. Insurers increased the applicable rate from 0.43 per thousand of the sum insured to 0.52 per thousand, according to Shivanshu Thaplyal, a partner at law firm Khaitan & Co.

"Since the incident in Teesta V in Sikkim in 2023, a new term has come in the insurance formalities, GLOF. After that, premiums have increased," said an executive with a state-run hydropower firm, requesting anonymity. The executive noted that in FY24, global reinsurers were reluctant to provide coverage as geo-mapping showed glaciers across the Himalayas in similar condition, making them wary that projects in other Indian Himalayan states could also be impacted. Coverage was eventually provided after intensive deliberations, but at a higher cost.

"Now, post the unfortunate incident in Nepal, we do not expect hydro projects with reservoirs to witness a major impact. But the insurance cost for run-of-the river projects will increase, and as witnessed post the 2023 incident in Sikkim, reinsurances may have to be negotiated much more rigorously," the executive added.

State-run hydropower companies have already seen insurance expenses swell. NHPC incurred ₹2,557.13 crore in insurance expenses over the last five fiscal years from FY22 to FY26, with premiums rising to ₹1,058.68 crore in FY26—72% more than ₹613.63 crore in FY25. SJVN Ltd and THDC Ltd recorded 14% and 22% jumps in insurance expenses, respectively, in recent years.

"The addition in the 1,000 MW pumped storage project and the 1,350 MW of thermal power plant has also led to an increase in overall insurance cost of THDC," said a THDC executive on condition of anonymity.

Road asset operators report that insurance claims have become more frequent as climate-related risks intensify. "Natural perils have definitely increased, and with this, the frequency of insurance claims has also increased," said Zafar Khan, president of the Highways Investors Association. He suggested that alternative products such as parametric insurance—which offers pre-agreed payouts rather than sanctioned claims post-incident—could become more relevant as climate-risk modelling improves.

Thaplyal noted that premium hikes are not the only tool insurers use to manage climate risk. Higher deductibles, exclusions from particular perils, and more stringent underwriting conditions are also options.

An insurance industry executive said it is too early to predict specific increases. "We are closely monitoring each and every situation, particularly developments in the reinsurance market and the demand for reinsurance capacity. There may be chances of an increase in insurance premiums depending on how demand evolves," the executive said, adding that it would be premature to give any specific estimate for coming years.

The Himalayan region has witnessed a series of floods, landslides, cloudbursts and GLOFs in recent years, including major events in Uttarakhand (2013), Himachal Pradesh (2023), Sikkim (2023) and Nepal (2024 and 2026).

"These issues get aggregated and the cumulative effect is very negative... Insurers notice these incidents. For them, it is like one single Himalayan region, which they think is becoming fragile," said A.K. Singh, a hydrologist and adjunct professor at IIT Roorkee.

Raj Kumar Chaudhary, former chairman and managing director of NHPC, said insurance premiums depend on risk perception. "After the GLOF incident in Sikkim in 2023 and even the massive floods and landslides in Uttarakhand in 2013, the insurance premiums increased. If insurers feel risk has increased, the premiums will also increase," he said.

NHPC operates 18 hydropower projects totalling 7.1GW across Jammu & Kashmir, Ladakh, Himachal Pradesh, Uttarakhand, Sikkim and Arunachal Pradesh.

On average, India's annual disaster-related losses amounted to about 0.4% of GDP between 1990 and 2024, according to the OECD's Economic Outlook for Southeast Asia, China and India 2025.

Queries emailed to the ministries of power and environment, forest and climate change, NHPC, SJVN, THDC, the National Highway Authority of India, and reinsurer GIC Re on 13 September remained unanswered till press time.

While the immediate focus is on the Himalayas, climate risk is not confined to the region. Infrastructure insurance costs are likely to rise elsewhere as extreme weather events become more common.