The Asian Development Bank has approved a $700 million policy-based loan for Pakistan to support reforms aimed at modernising the insurance sector, expanding coverage and strengthening financial protection against natural disasters, health emergencies and economic shocks.

The lender said the Insurance Transformation Program is designed to deepen insurance markets and improve financial resilience for households, businesses, farmers and public finances. It said the reforms would help reduce vulnerabilities, support faster recovery after crises and lessen pressure on government finances in the aftermath of disasters.

ADB Country Director for Pakistan Emma Fan said the programme would help shift Pakistan’s insurance industry from a legacy rules-based framework to a modern, risk-based and market-oriented system.

According to the ADB, the reforms are also expected to mobilise long-term capital, support infrastructure financing and encourage a more competitive and inclusive insurance market.

Pakistan’s insurance sector remains underdeveloped, with penetration at just 0.7 per cent of gross domestic product, leaving many households and businesses exposed to environmental, health and economic risks.

The programme will support digital distribution channels, satellite-based risk assessment, parametric insurance products and risk-pooling mechanisms. It will also promote insurance products tailored for women, farmers and vulnerable communities.