Lagos State secures up to US$7.5m parametric flood insurance coverage

The Lagos State government has contracted a parametric flood-risk insurance policy in the Nigerian insurance market, which is designed to protect up to 4 million vulnerable people, providing up to USD 7.5 million for flood response and recovery.

The policy’s activation marks a major milestone for the Tripartite Agreement Programme, which aims to build developing countries’ resilience to climate risk.

The programme is a public-private partnership between the Insurance Development Forum (IDF), the United Nations Development Programme (UNDP), and the German Federal Ministry for Economic Cooperation and Development (BMZ) through the InsuResilience Solutions Fund (ISF).

For the coastal megacity of Lagos, which has an estimated population of over 22 million people, climate change continues to intensify the frequency and impact of flood events.

These impacts are aggravated by rapid urbanisation across Lagos State, which disproportionately affects 80% of the population who are low-income, with insurance coverage below 0.5%

The Tripartite Agreement Programme’s Nigeria project, led by the Government of Lagos State, was launched in 2022 to unlock financial resources for communities to prepare for and recover from climate-impacts.

His Excellency, the Governor of Lagos State, Babajide Olusola Sanwo-Olu, commented: “Climate inaction could cost Lagos State just under USD 40 billion by 2050, with severe consequences for our people, infrastructure and economy. Our wetlands and biodiversity are also under threat. These realities demand urgent action. This pioneering parametric flood insurance policy strengthens our ability to protect lives, livelihoods and public finances while embedding climate risk management into Lagos State’s long-term development planning.”

Dr. Katharina Stasch, Director-General for Multilateral Development Policy; Transformation; Climate, German Federal Ministry for Economic Cooperation and Development (BMZ), said: “This product highlights the impact that effective collaboration between governments, insurance and development partners, can deliver. As climate risks continue to rise, BMZ is proud to have supported the Tripartite Agreement Programme’s efforts to scale sovereign risk finance and to witness the new alliances and models for cooperation emerging through the programme.”

As per the announcement, the parametric flood-risk product is a collaborative effort that was designed by a team of IDF member insurance organisations in partnership with the Lagos State Government.

This includes major firms, such as AXA Climate, AXA Mansard in Nigeria, global reinsurer Swiss Re, flood modeler JBA Risk Management, satellite firm ICEYE and African Risk Capacity Ltd.

ISF reportedly co-funded this work alongside the IDF insurance industry members, with support from UNDP Nigeria and UNDP’s Insurance and Risk Finance Facility.

Partners in Nigeria include the Lagos State Government Office of Sustainable Development Goals (OSDG), the Lagos State Ministry of Finance, Lagos State Ministry of Budget and Economic Planning and the Lagos State Emergency Management Agency (LASEMA).

Furthermore, the insurance product was delivered by the IDF team and received regulatory approval earlier this year, while the ISF financed 90% of the first year’s premium to enable placement of the product.

It’s also been confirmed that the Lagos State government is committed to increasing their premium finance allocation beyond 10% in the second and third year of the parametric policy, to ensure the sustainability of the protection provided by the product.

Marcos Neto, UN Assistant Secretary-General, and Director of UNDP’s Bureau for Policy and Programme Support, added: “This milestone in Lagos shows that embedding insurance into public planning can strengthen support for vulnerable communities while advancing inclusive, climate-resilient development. As climate risks intensify, Lagos State is offering a scalable and sustainable model for safeguarding livelihoods and public finances.”

Karina Whalley, Head of Public Sector, AXA Climate and IDF Lagos Project Co-Lead, said: “This policy demonstrates the power of insurance to enable preparedness ahead of and faster recovery after disasters, as well as greater financial resilience for governments; in short, future-ready nations. The product design harnessed our industry members’ technical expertise in flood risk modelling and parametric insurance to develop a scalable solution tailored to the needs of climate-vulnerable communities in Lagos.”

Dr. Annette Detken, Head of InsuResilience Solutions Fund (ISF), noted: “With this policy now live, financial resources can flow quickly and predictably to communities when floods strike, helping to safeguard lives and livelihoods. ISF is proud to have supported this innovative public-private partnership, which demonstrates how government leadership, industry expertise, and development finance can come together to build sustainable, scalable solutions. By committing to long-term financing, Lagos State is laying the groundwork for a national model of climate resilience and financial protection for Nigeria.”