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СпутникиРНSpaceXРоскосмосNASAPakistan’s infrastructure is increasingly exposed to a risk that can no longer be treated as an occasional emergency: climate and disaster risk. Floods, extreme rainfall, earthquakes, landslides and heat are not only damaging physical assets; they disrupt construction schedules, supply chains, business revenues, public services and investment returns. The question for Pakistan is therefore no longer simply how much infrastructure we need to build.
It is how we finance the risks that can prevent that infrastructure from functioning when a disaster strikes. The floods of 2022 demonstrated the scale of this challenge. Post-Disaster Needs Assessment of Pakistan, estimated more than $ 30 billion in damages and economic losses with substantial impacts on housing, agriculture, transport, energy and public infrastructure. The experience of subsequent disasters has reinforced the same vulnerability.
For a country with constrained fiscal space, repeatedly financing reconstruction after every major shock is becoming increasingly difficult. The infrastructure financing model must therefore evolve from one focused primarily on construction to one that also anticipates the financial consequences of disruption.
This raises a fundamental question: If Pakistan increasingly relies on private investment, public-private partnerships and project finance to build infrastructure, who should carry the financial consequences when climate and disaster risks materialize?
The answer cannot simply be “government” or “private sector”. It must depend on which party is best placed to manage, absorb and transfer each layer of risk. The term “Infrastructure” itself is broader than roads and bridges. It includes transport and communications; energy and power; water resources and irrigation; physical planning and housing; urban infrastructure; public buildings and facilities and increasingly digital and telecommunications infrastructure. Federal development program of Pakistan, illustrates the scale of this investment. In FY 2025–26, the infrastructure sector received an allocation of approximately Rs 614.7 billion, including Rs 325.6 billion for transport and communications, Rs 122.7 billion for energy, Rs 97.8 billion for water and Rs 68.6 billion for physical planning and housing.
The broader construction sector also returned to growth, expanding by 6.61% in FY 2024–25, after contracting by 1.14% in the previous year. This figure should not be interpreted as a 6.61% increase in the entire infrastructure stock; construction and infrastructure are not synonymous. It does, however, demonstrate renewed activity in a sector increasingly exposed to climate and disaster risks. Consider a privately financed toll road. A concession agreement may allocate flood risk to the project company. The company may purchase property insurance, business-interruption cover and liability insurance, while contractors carry their own obligations and guarantees. Yet after a major flood, the road may remain closed for months, toll revenues may disappear, debt service may continue and government may still face pressure to restore connectivity.
This leads to the first question Pakistan should ask: Has the risk actually been transferred or has it merely been assigned contractually?
A contract can allocate responsibility but it does not create financial capacity. A contractor with limited capital cannot credibly absorb a catastrophic loss simply because the contract says it can. Similarly, an insurance policy with a low catastrophe limit cannot cover an exposure larger than that limit.
The second question is therefore: How much of the identified risk is actually funded?
Every major infrastructure project should disclose four things: the plausible maximum loss, who is contractually responsible for it, how much of that exposure is actually backed by reserves or insurance and how much could ultimately return to government. This would bring disaster risk into the same financial conversation as construction cost, debt service and expected returns.
The third question is: What happens to revenue and essential services while an asset is being repaired?
This is where conventional property insurance can be insufficient. A flood may damage a bridge but the larger economic loss may arise from months of interrupted transport. Damage to a power facility may affect customers far beyond the physical repair bill. A flood at a construction site may delay completion, increase financing costs and postpone revenue generation. Pakistan therefore needs to think about insurance not simply as protection for physical assets but as protection for income, liquidity and service continuity.
This is where parametric insurance deserves greater attention. Parametric insurance pays when a predefined trigger is reached. For example, a specified level of rainfall, river discharge, wind speed or earthquake intensity. Rather than waiting for a lengthy physical loss assessment, the payout is determined using agreed parameters and independently verified data.For infrastructure, this can complement conventional insurance.
A flood-exposed road, for example, could retain traditional insurance for physical damage while adding a parametric layer triggered by extreme rainfall or river levels. The resulting payout could provide immediate liquidity for emergency repairs, equipment mobilization, temporary works, alternative transport arrangements or working capital.
The fourth question is therefore: Where does Pakistan need rapid liquidity rather than conventional loss reimbursement?
The international experiences provides compelling evidences. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) has developed parametric insurance for governments as well as electricity and water utilities. Its electric-utility product was specifically developed to provide rapid liquidity for damage to transmission and distribution systems following tropical cyclones.
In 2024, the electricity utility of Grenada, an island country in the Caribbean Sea, received approximately US$ 9.3 million following Hurricane Beryl while its water utility received approximately $ 2.2 million under the water utility parametric products of Caribbean Catastrophe Risk Insurance Facility (CCRIF) water-utility parametric product. The wider CCRIF model has made 78 payouts totalling approximately US$ 390 million since its establishment in 2007. Its 2024 experience included US$ 84.5 million in payouts to seven members, including governments, electricity and water utilities and a tourist attraction.
Jamaica, another island country in the Caribbean Sea, provides another important lesson through catastrophe bonds. A US$ 150 million parametric catastrophe bond was triggered by Hurricane Melissa in 2025, demonstrating how capital-market instruments can provide pre-arranged liquidity following a severe disaster. The significance was not that the instrument covered Jamaica’s entire economic loss; it did not.
Its value was that a defined layer of catastrophic risk had already been transferred before the event occurred. Mexico has similarly developed a multi-layered disaster-risk financing approach including catastrophe bonds covering earthquakes and hurricanes. Such mechanisms demonstrate that governments do not have to wait until a disaster occurs to begin searching for reconstruction finance.
These examples point to the fifth question for Pakistan: can private capital and insurance markets absorb some of the risks currently returning to the public balance sheet?
The answer is yes, but only if Pakistan develops the “infrastructure for the infrastructure risk market” itself. That requires stronger hazard and asset-level data, probabilistic catastrophe models, reliable weather and seismic information, transparent insurance procurement, stronger domestic insurance and reinsurance capacity and clearer risk allocation within public-private partnerships.
Multilateral and donor-supported programs can play a catalytic role by financing risk modelling, technical assistance, market development and initial capacity-building rather than permanently subsidizing commercial risk. Pakistan should also move towards a layered disaster-risk financing model. Frequent and manageable losses can be retained through maintenance budgets, deductibles and reserves. Medium-sized events can be supported through contingent financing and conventional insurance. Severe, low-frequency events can be transferred through insurance, reinsurance and parametric instruments. Truly systemic disasters may require concessional and international support.
But the final question is perhaps the most important: who pays when the insurance payout arrives?
A rapid payout has little value if it cannot quickly translate into restored infrastructure. Governments and project companies therefore need pre-agreed procedures for receiving and deploying proceeds, emergency procurement arrangements, budget authority and clear rules for restoring essential services. Lender rights over insurance proceeds must also be reconciled with the public interest in rapid restoration. Pakistan should therefore move from “insurance procurement” to “infrastructure risk financing.”
Developers, investors and lenders should treat disaster risk as a financial risk, not simply an environmental concern. The objective is not to insure everything. It is to ensure that every material risk has a credible financing strategy. Pakistan cannot prevent every flood, earthquake or extreme weather event. But it can decide who finances the consequences before the disaster happens.
That is the real opportunity presented by parametric insurance: not to replace conventional insurance, public finance or physical resilience but to connect them into a financial architecture capable of keeping Pakistan’s infrastructure and the economy that depends on it moving when the next shock arrives.
The article does not necessarily reflect the opinion of Business Recorder or its owners.
Pakistan’s infrastructure is increasingly exposed to a risk that can no longer be treated as an occasional emergency: climate and disaster risk. Floods, extreme rainfall, earthquakes, landslides and heat are not only damaging physical assets; they disrupt construction schedules, supply chains, business revenues, public services and investment returns. The question for Pakistan is therefore no longer simply how much infrastructure we need to build.
It is how we finance the risks that can prevent that infrastructure from functioning when a disaster strikes. The floods of 2022 demonstrated the scale of this challenge. Post-Disaster Needs Assessment of Pakistan, estimated more than $ 30 billion in damages and economic losses with substantial impacts on housing, agriculture, transport, energy and public infrastructure. The experience of subsequent disasters has reinforced the same vulnerability.
For a country with constrained fiscal space, repeatedly financing reconstruction after every major shock is becoming increasingly difficult. The infrastructure financing model must therefore evolve from one focused primarily on construction to one that also anticipates the financial consequences of disruption.
This raises a fundamental question: If Pakistan increasingly relies on private investment, public-private partnerships and project finance to build infrastructure, who should carry the financial consequences when climate and disaster risks materialize?
The answer cannot simply be “government” or “private sector”. It must depend on which party is best placed to manage, absorb and transfer each layer of risk. The term “Infrastructure” itself is broader than roads and bridges. It includes transport and communications; energy and power; water resources and irrigation; physical planning and housing; urban infrastructure; public buildings and facilities and increasingly digital and telecommunications infrastructure. Federal development program of Pakistan, illustrates the scale of this investment. In FY 2025–26, the infrastructure sector received an allocation of approximately Rs 614.7 billion, including Rs 325.6 billion for transport and communications, Rs 122.7 billion for energy, Rs 97.8 billion for water and Rs 68.6 billion for physical planning and housing.
The broader construction sector also returned to growth, expanding by 6.61% in FY 2024–25, after contracting by 1.14% in the previous year. This figure should not be interpreted as a 6.61% increase in the entire infrastructure stock; construction and infrastructure are not synonymous. It does, however, demonstrate renewed activity in a sector increasingly exposed to climate and disaster risks. Consider a privately financed toll road. A concession agreement may allocate flood risk to the project company. The company may purchase property insurance, business-interruption cover and liability insurance, while contractors carry their own obligations and guarantees. Yet after a major flood, the road may remain closed for months, toll revenues may disappear, debt service may continue and government may still face pressure to restore connectivity.
This leads to the first question Pakistan should ask: Has the risk actually been transferred or has it merely been assigned contractually?
A contract can allocate responsibility but it does not create financial capacity. A contractor with limited capital cannot credibly absorb a catastrophic loss simply because the contract says it can. Similarly, an insurance policy with a low catastrophe limit cannot cover an exposure larger than that limit.
The second question is therefore: How much of the identified risk is actually funded?
Every major infrastructure project should disclose four things: the plausible maximum loss, who is contractually responsible for it, how much of that exposure is actually backed by reserves or insurance and how much could ultimately return to government. This would bring disaster risk into the same financial conversation as construction cost, debt service and expected returns.
The third question is: What happens to revenue and essential services while an asset is being repaired?
This is where conventional property insurance can be insufficient. A flood may damage a bridge but the larger economic loss may arise from months of interrupted transport. Damage to a power facility may affect customers far beyond the physical repair bill. A flood at a construction site may delay completion, increase financing costs and postpone revenue generation. Pakistan therefore needs to think about insurance not simply as protection for physical assets but as protection for income, liquidity and service continuity.
This is where parametric insurance deserves greater attention. Parametric insurance pays when a predefined trigger is reached. For example, a specified level of rainfall, river discharge, wind speed or earthquake intensity. Rather than waiting for a lengthy physical loss assessment, the payout is determined using agreed parameters and independently verified data.For infrastructure, this can complement conventional insurance.
A flood-exposed road, for example, could retain traditional insurance for physical damage while adding a parametric layer triggered by extreme rainfall or river levels. The resulting payout could provide immediate liquidity for emergency repairs, equipment mobilization, temporary works, alternative transport arrangements or working capital.
The fourth question is therefore: Where does Pakistan need rapid liquidity rather than conventional loss reimbursement?
The international experiences provides compelling evidences. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) has developed parametric insurance for governments as well as electricity and water utilities. Its electric-utility product was specifically developed to provide rapid liquidity for damage to transmission and distribution systems following tropical cyclones.
In 2024, the electricity utility of Grenada, an island country in the Caribbean Sea, received approximately US$ 9.3 million following Hurricane Beryl while its water utility received approximately $ 2.2 million under the water utility parametric products of Caribbean Catastrophe Risk Insurance Facility (CCRIF) water-utility parametric product. The wider CCRIF model has made 78 payouts totalling approximately US$ 390 million since its establishment in 2007. Its 2024 experience included US$ 84.5 million in payouts to seven members, including governments, electricity and water utilities and a tourist attraction.
Jamaica, another island country in the Caribbean Sea, provides another important lesson through catastrophe bonds. A US$ 150 million parametric catastrophe bond was triggered by Hurricane Melissa in 2025, demonstrating how capital-market instruments can provide pre-arranged liquidity following a severe disaster. The significance was not that the instrument covered Jamaica’s entire economic loss; it did not.
Its value was that a defined layer of catastrophic risk had already been transferred before the event occurred. Mexico has similarly developed a multi-layered disaster-risk financing approach including catastrophe bonds covering earthquakes and hurricanes. Such mechanisms demonstrate that governments do not have to wait until a disaster occurs to begin searching for reconstruction finance.
These examples point to the fifth question for Pakistan: can private capital and insurance markets absorb some of the risks currently returning to the public balance sheet?
The answer is yes, but only if Pakistan develops the “infrastructure for the infrastructure risk market” itself. That requires stronger hazard and asset-level data, probabilistic catastrophe models, reliable weather and seismic information, transparent insurance procurement, stronger domestic insurance and reinsurance capacity and clearer risk allocation within public-private partnerships.
Multilateral and donor-supported programs can play a catalytic role by financing risk modelling, technical assistance, market development and initial capacity-building rather than permanently subsidizing commercial risk. Pakistan should also move towards a layered disaster-risk financing model. Frequent and manageable losses can be retained through maintenance budgets, deductibles and reserves. Medium-sized events can be supported through contingent financing and conventional insurance. Severe, low-frequency events can be transferred through insurance, reinsurance and parametric instruments. Truly systemic disasters may require concessional and international support.
But the final question is perhaps the most important: who pays when the insurance payout arrives?
A rapid payout has little value if it cannot quickly translate into restored infrastructure. Governments and project companies therefore need pre-agreed procedures for receiving and deploying proceeds, emergency procurement arrangements, budget authority and clear rules for restoring essential services. Lender rights over insurance proceeds must also be reconciled with the public interest in rapid restoration. Pakistan should therefore move from “insurance procurement” to “infrastructure risk financing.”
Developers, investors and lenders should treat disaster risk as a financial risk, not simply an environmental concern. The objective is not to insure everything. It is to ensure that every material risk has a credible financing strategy. Pakistan cannot prevent every flood, earthquake or extreme weather event. But it can decide who finances the consequences before the disaster happens.
That is the real opportunity presented by parametric insurance: not to replace conventional insurance, public finance or physical resilience but to connect them into a financial architecture capable of keeping Pakistan’s infrastructure and the economy that depends on it moving when the next shock arrives.
The article does not necessarily reflect the opinion of Business Recorder or its owners.
| # | Наименование новости | Тональность | Информативность | Дата публикации |
|---|---|---|---|---|
| 1 | The water paradox: drowning in floods, dying of thirst | 0 | 6.08 | 27-08-2026 |
| 2 | Biodiversity financing: why investing in nature matters for Pakistan’s economy | 0 | 6.08 | 15-09-2026 |
| 3 | Our housing challenge goes beyond a shortage of homes | 0 | 9.59 | 27-08-2026 |
| 4 | Pakistan and Asia’s energy security: lessons from US-Iran conflict | 0 | 9.18 | 07-09-2026 |
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| 7 | The digital divide limiting opportunities in Pakistan | 0 | 6.79 | 18-08-2026 |
| 8 | Rooftop solar isn’t energy transition | 0 | 7.06 | 28-08-2026 |
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| 10 | Let Islamabad’s Margalla be its water bank | 0 | 6.86 | 19-09-2026 |