Green insurance in climate risk and agriculture: How prepared is Bangladesh?

Staff Correspondent: As climate risks intensify globally, green insurance continues to gain importance as a tool to protect environmentally sustainable investments and safeguard vulnerable sectors such as agriculture. According to observations from Swiss Re Institute, demand for green insurance continues to rise rapidly alongside growing climate-related risks. Industry analysts estimate that the global green insurance market grew from approximately $1.26 billion in 2024 to $1.45 billion in 2025. If the current annual growth rate of 14-16 percent continues, the market could exceed $6 billion by 2033. While Europe currently leads, demand continues to expand quickly across the Asia-Pacific region.

In Bangladesh, the sector remains at an early stage but continues to gain traction, particularly in agriculture. Various World Bank reports highlight that climate change continues to increase risks to the country’s agricultural output, making insurance protection more critical than ever. In this context, weather index-based insurance has emerged as an effective solution for farmers, offering compensation based on measurable weather conditions rather than traditional loss assessments.

The private sector continues to play a key role in advancing this initiative. Green Delta Insurance Company Limited has taken a leading position in expanding climate-focused insurance products. According to company data, the number of farmers covered under such insurance schemes increased from around 3,000 in 2022 to over 30,000 in 2024, marking an almost tenfold rise in just two years. During the same period, more than Tk 1.80 crore in claims were settled among affected farmers, strengthening financial resilience at the grassroots level.

Climate change continues to place pressure on the livestock sector, particularly due to rising temperatures. In response, pilot projects involving heat index-based insurance products have been introduced. These products are designed to compensate livestock farmers for losses caused by extreme heatwaves. Experts suggest that as heat-related risks continue to grow across South Asia, demand for such innovative insurance solutions will increase significantly.

Globally, green insurance remains concentrated in three major areas: renewable energy, pollution liability and green infrastructure. Insurance products continue to secure investments in solar and wind power projects, cover financial risks related to industrial pollution and offer incentives for environmentally sustainable construction. These developments continue to boost investor confidence in green initiatives.

Despite its potential, Bangladesh’s insurance penetration remains low at around 0.40 percent. According to the Insurance Development and Regulatory Authority (IDRA), this compares to approximately 4 percent in India and 5-12 percent in developed countries. However, green insurance presents a significant opportunity to expand the market and attract new segments. Key challenges include low public awareness, limited product diversity, relatively high premiums and insufficient data for risk assessment.

The government continues to encourage environmentally sustainable financial practices to achieve its Sustainable Development Goals (SDGs). Stakeholders believe that stronger policy support, technological innovation and increased awareness could position green insurance as a powerful tool for managing climate risks in Bangladesh.

Industry analysts emphasise that in a climate-vulnerable country like Bangladesh, green insurance represents a strategic necessity rather than just a financial product. If effectively integrated into the mainstream financial system, it could play a crucial role in driving sustainable growth and reducing carbon emissions by 2030.