Colombia obtains parametric insurance for smallholder farmers with international help
Colombia has secured parametric agricultural insurance policies for smallholder farmers, a move aimed at mitigating the impacts of drought and excess rainfall as the country braces for El Niño. The contracts, issued on August 1, 2026, were developed under a Tripartite Agreement involving the Insurance Development Forum (IDF), the United Nations Development Programme (UNDP), and Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) via the InsuResilience Solutions Fund (ISF). The government has contracted five such policies to cover 14,402 smallholder farmers across five departments.
The insurance coverage extends to farmers in Sucre, Córdoba, Cundinamarca, Meta, and Chocó, potentially benefiting up to 41,600 people. The policies provide up to $20.14 million in protection against extreme weather. The program is led by Colombia’s Ministry of Agriculture and Rural Development (MARD) and the Fund for the Financing of the Agricultural Sector (FINAGRO), working alongside the five regional departments.
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The specific insurance product is based on a satellite-derived Water Balance Index at the municipal level. The IDF explains that this index compares current conditions against historical data to identify periods of severe drought or excess rainfall. When predefined thresholds are exceeded, payouts are triggered automatically. This mechanism eliminates the need for traditional post-disaster loss assessments and aims to enable faster financial support to reach affected producers.
The product was co-designed by the Ministry of Agriculture and Rural Development with a consortium of IDF members, including broker Guy Carpenter, reinsurers Swiss Re and Munich Re, AXA Climate, insurance technology services company Raincoat, and local insurer La Previsora S.A. Compañía de Seguros. The parametric product was co-financed by these consortium members and the ISF, with the premium for the first year co-financed by the Government of Colombia and the ISF.
This initiative marks the first time Colombia’s departmental governments have utilized parametric insurance to strengthen agricultural risk management. The approach provides a rapid financing mechanism to support enrolled smallholder farmers after severe climate events, reducing their dependence on uncertain or delayed emergency funding. The IDF noted that the product will lay the technical, legal, and financial groundwork needed to scale and replicate this approach across other departments in the country.
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For the farmers involved, having a pre-agreed financial trigger based on objective satellite data changes how climate risk is managed. Instead of waiting for assessments after a disaster, the funds become available based on measurable environmental conditions, allowing families to bridge the gap until crops recover or they can replant without the added stress of immediate cash flow shortages. This financial buffer can mean the difference between a season lost and a season sustained, stabilizing local economies that rely heavily on agriculture.
Lucy Inés García Montes, Governor of Sucre, emphasized the importance of acting before disasters strike. “Preparing for El Niño means acting before disasters strike,” she said. “Through this collaboration between the national government, the five participating departments and international partners, we are providing smallholder farmers with the financial protection they need to manage climate risks and protect their livelihoods.”
Jose Fernando Sánchez, Senior Vice President at Guy Carpenter Colombia, praised the public-private collaboration. “The IDF industry consortium congratulates Colombia on contracting this product which protects livelihoods, provides food security and strengthens the local insurance market,” he said. “It is encouraging to see this project deliver much needed protection as a result of the effective public-private collaboration which the IDF champions and the Tripartite Agreement Programme enables.”
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Dr. Annette Detken, Head of the InsuResilience Solutions Fund (ISF), highlighted the role of climate risk insurance in rural recovery. “This initiative highlights the important role that climate risk insurance can play in protecting smallholder farmers and helping rural communities recover more quickly from drought and excess rainfall,” she said. “We are proud to support a solution that brings together government, development partners and the insurance sector to strengthen climate resilience in Colombia and create a model that can be expanded across the country.”
Marcos Neto, UN Assistant Secretary-General and Director of UNDP’s Bureau for Policy and Programme Support, noted that lasting resilience requires strong institutions. “Lasting resilience takes more than innovative finance — it takes strong institutions and the capacity to act,” he said. “Working with the Government of Colombia, we are helping turn a promising pilot into a scalable climate risk financing solution for agriculture.
