The Asian Development Bank (ADB) has approved a $700 million policy-based loan to help Pakistan reform and modernize its insurance sector, expand insurance coverage, and strengthen financial protection against natural disasters, health emergencies, and economic shocks.

The funding will support the government’s Insurance Transformation Program, which aims to develop a stronger and more inclusive insurance market while improving financial resilience for households, businesses, farmers, and the public sector. According to ADB, the reforms will help speed up recovery after disasters and reduce the fiscal burden on the government.

ADB Country Director for Pakistan Emma Fan said the program will shift the country’s insurance industry from an outdated rules-based system to a modern, risk-based regulatory framework that promotes greater efficiency and market competition.

Pakistan’s insurance sector remains one of the smallest in the region, with insurance penetration at just 0.7 percent of GDP, leaving millions of individuals and businesses exposed to financial losses from disasters and other risks.

The reform package will introduce digital insurance distribution, satellite-based risk assessment, parametric insurance products, and risk-pooling mechanisms. It will also promote insurance solutions designed for women, farmers, and other underserved and vulnerable groups while encouraging long-term investment to support infrastructure development.