Colombia strengthens climate resilience with parametric insurance for 14,402 smallholder farmers

The Colombian government has contracted five parametric agricultural insurance policies which directly cover 14,402 smallholder farmers, benefitting up to 41,600 people across their households in five departments — Sucre, Córdoba, Cundinamarca, Meta and Chocó. 

The policies provide up to US$20.14 million in coverage against drought and excess rainfall, and come into effect as Colombia prepares for intensifying effects of El Niño during the second half of 2026.

The initiative is led by Colombia’s Ministry of Agriculture and Rural Development (MARD) and the Fund for the Financing of the Agricultural Sector (FINAGRO), working with the governments of the five regional departments. It was delivered through the Tripartite Agreement Programme, a public-private partnership between the Insurance Development Forum (IDF), the United Nations Development Programme (UNDP), and Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), through the InsuResilience Solutions Fund (ISF).

The parametric insurance product was co-designed by the Ministry of Agriculture and Rural Development together with a consortium of IDF members comprising Guy Carpenter, Swiss Re, AXA Climate, Munich Re, insurance technology services company Raincoat and local insurer La Previsora S.A. Compañía de Seguros. It was co-financed by the IDF consortium members and ISF.

“Preparing for El Niño means acting before disasters strike. 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,” said Lucy Inés García Montes, Governor of Sucre, Colombia.

José Fernando Sánchez, Senior Vice President, Guy Carpenter Colombia, member of the IDF, said, “The IDF industry consortium congratulates Colombia on contracting this product which protects livelihoods, provides food security and strengthens the local insurance market. 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.” 

The insurance product is based on a satellite-derived Water Balance Index at the municipal level. The index is compared against historical data to identify periods of severe drought or excess rainfall. When predefined thresholds are exceeded, insurance payouts are triggered automatically, eliminating the need for traditional post-disaster loss assessments and enabling faster financial support to reach affected producers.

The policies were issued on 1 August, 2026 with the premium for the first year co-financed by the Government of Colombia and ISF

Dr. Annette Detken, Head of InsuResilience Solutions Fund (ISF) added, “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. 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.” 

This is the first time Colombia’s departmental governments have used parametric insurance to strengthen agricultural risk management, providing a rapid financing mechanism to support enrolled smallholder farmers after severe climate events, reducing their dependence on uncertain or delayed emergency funding. This product will lay the technical, legal, and financial groundwork needed to scale and replicate this approach across other departments in the country.

“Lasting resilience takes more than innovative finance — it takes strong institutions and the capacity to act. Working with the Government of Colombia, we are helping turn a promising pilot into a scalable climate risk financing solution for agriculture,” stated Marcos Neto, UN Assistant Secretary-General and Director of UNDP’s Bureau for Policy and Programme Support.

UNDP has worked with MADR and FINAGRO to embed the policy within Colombia’s agricultural risk management framework. Alongside supporting the product’s development and implementation, UNDP helped strengthen institutional capacity and created the enabling conditions for parametric insurance to be adopted by the departmental governments.

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