ISLAMABAD: The Asian Development Bank (ADB) announced on Thursday that it has approved a $700 million policy-based loan that aims to support reforms aimed at strengthening insurance in Pakistan and expanding financial protection for households and businesses in the country.
The Insurance Transformation Program will strengthen Pakistan’s financial resilience by deepening insurance markets and expanding financial protection for households, businesses, farmers, and public finances, the ADB said in a press release.
It said the loan would approve financial protection against extreme weather events, disasters, and life-cycle risks. The reforms are expected to reduce financial vulnerabilities, support faster recovery from shocks, and lessen pressure on public finances following disasters and other crises, the ADB said.
“This program supports the transformation of Pakistan’s insurance sector from a legacy, rules-based framework to a modern, risk-based, and market-oriented system,” ADB Country Director for Pakistan Emma Fan said in a statement.
It noted that Pakistan’s financial system remains heavily bank-dominated, while insurance penetration stands at only 0.7 percent of the country’s gross domestic product (GDP). Due to this, it said several households, businesses, and farmers remain financially exposed to environmental, health, and economic shocks.
The loan will support resilience initiatives and disaster risk financing by expanding inclusive and shock-responsive insurance products, particularly for farmers, women, and vulnerable households.
“In particular, the program will promote insurance solutions tailored to the needs of women and girls through targeted product design, digital access, and sex-disaggregated data,” the bank said.
It said these steps aim to expand insurance coverage through digital distribution systems, satellite-based risk assessment, parametric insurance solutions, and risk-pooling mechanisms. The program also aims to improve claims settlement and access to insurance services.
The ADB has supported development reforms in Pakistan by strengthening investments in critical minerals, the private sector, public finance and social protection, transport and energy infrastructure projects.
The bank says it has committed 789 public sector loans, grants, guarantees and technical assistance totaling $45.8 billion to Pakistan to date.
