Designed and structured by AXA Climate alongside leading insurance and risk modelling partners, the Lagos State government has contracted a parametric flood-risk insurance policy in the Nigerian insurance market, covering up to 4 million vulnerable people across 7 local government areas and securing up to US$7.5 million for flood response and recovery.
A Sovereign Parametric Insurance Milestone for Climate Resilience
The policy’s launch is a major milestone for the Tripartite Agreement Programme – a public-private partnership between the United Nations Development Programme (UNDP), the Insurance Development Forum (IDF) and the German Federal Ministry for Economic Cooperation and Development (BMZ) through the InsuResilience Solutions Fund (ISF) – to build developing countries’ resilience to climate risk.
For the coastal megacity of Lagos, with an estimated population reaching over 22 million people, climate change is intensifying the frequency and impact of flood events. These impacts are exacerbated by rapid urbanisation across Lagos State, where low-income households make up 80 percent of the population and insurance penetration is below 0.5 percent. 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 said: “Climate inaction could cost Lagos State just under US$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.”
Designing the parametric insurance solution
The parametric flood-risk product was designed by a team of IDF member insurance organisations in partnership with the Lagos State Government, including AXA Climate, AXA Mansard in Nigeria, Swiss Re, flood modeler JBA Risk Management, satellite company ICEYE and African Risk Capacity Ltd. This work was co-funded by ISF and the IDF insurance industry members and supported by UNDP Nigeria and UNDP’s Insurance and Risk Finance Facility. Partners in Nigeria include the Lagos State Government, the Lagos State Ministry of Finance, Lagos State Ministry of Budget and Economic Planning, and the Lagos State Emergency Management Agency (LASEMA).
Unlike traditional indemnity insurance, parametric insurance provides payouts based on predefined flood triggers measured through advanced modelling and satellite data. This allows funds to be released rapidly and transparently, without loss assessment procedures, a critical feature for emergency response and direct cash transfers to affected communities.
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.”
Embedding parametric insurance into public planning
The policy is now live, enabling the local Government to quickly access funds to support emergency response efforts. This includes disaster relief and direct cash transfers to affected communities in the seven covered districts, as has been outlined in the Lagos Flood Contingency Plan which was developed with the support of UNDP and the African Risk Capacity. UNDP is also supporting the Government of Nigeria with the integration of risk finance into Nigeria’s Nationally Determined Contribution (NDC) 3.0.
Importantly, 90% of the first-year premium was financed through the InsuResilience Solutions Fund. The Lagos State government is committed to increasing their premium finance allocation beyond 10 percent in the second and third year of the policy, to ensure the sustainability of the protection provided by the product.
The policy is now operational, allowing the local government to rapidly mobilise funds for emergency response. This includes disaster relief and direct cash transfers to affected communities across the seven local government areas covered, in line with the Lagos Flood Contingency Plan developed with support from UNDP and African Risk Capacity. In parallel, UNDP is supporting the Government of Nigeria in integrating risk financing into its Nationally Determined Contribution (NDC) 3.0.
A blueprint for scalable climate risk finance
At AXA Climate, we believe that this initiative provides a scalable framework for expanding parametric insurance solutions across climate-vulnerable countries, combining public leadership, development finance and insurance expertise to strengthen both adaptation strategies and fiscal resilience to climate shocks.
The Government of Nigeria is now considering extending the scheme to other states, laying the groundwork for a durable and replicable approach to disaster risk management. Beyond Nigeria, it highlights how technology-driven flood insurance, powered by advanced modelling and satellite data, can support resilience in climate-exposed countries and major urban centers worldwide.
AXA Climate remains committed to working alongside governments and institutions to develop innovative parametric insurance solutions that accelerate climate adaptation and reduce the protection gap.
