(BOGOTÁ, Colombia) – Colombia has contracted five parametric agricultural insurance policies that directly cover 14,402 smallholder farmers and benefit up to 41,600 people across their households, as the country prepares for stronger El Niño effects in the second half of 2026. The policies provide coverage worth up to $20.14 million (approximately £15.8 million / €18.5 million) against drought and excess rainfall.
The initiative is led by Colombia’s Ministry of Agriculture and Rural Development and the Fund for the Financing of the Agricultural Sector, known as FINAGRO, working with the governments of five departments: Sucre, Córdoba, Cundinamarca, Meta and Chocó. It was delivered through the Tripartite Agreement Programme, a public private partnership between the Insurance Development Forum, the United Nations Development Programme, and Germany’s Federal Ministry for Economic Cooperation and Development, through the InsuResilience Solutions Fund.
The parametric insurance product was co-designed by the Ministry of Agriculture and Rural Development together with a consortium of Insurance Development Forum members. The consortium comprises Guy Carpenter, Swiss Re, AXA Climate, Munich Re, insurance technology services company Raincoat, and local insurer La Previsora S.A. Compañía de Seguros. Development costs were shared between the consortium members and the InsuResilience Solutions Fund.
The insurance product relies on a satellite derived Water Balance Index measured 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. This removes the need for traditional post disaster loss assessments and allows faster financial support to reach affected producers.
The policies came into force on 1 August 2026. The premium for the first year was co-financed by the Government of Colombia and the InsuResilience Solutions Fund.
Lucy Inés García Montes, Governor of Sucre, said preparing for El Niño means acting before disasters strike. She said the collaboration between the national government, the five participating departments and international partners is providing smallholder farmers with the financial protection they need to manage climate risks and protect their livelihoods.
José Fernando Sánchez, Senior Vice President at Guy Carpenter Colombia and a member of the Insurance Development Forum, said the industry consortium congratulated Colombia on contracting the product, which protects livelihoods, provides food security and strengthens the local insurance market. He said it was encouraging to see the project deliver much needed protection as a result of effective public private collaboration.
This marks the first time Colombia’s departmental governments have used 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 product will lay the technical, legal and financial groundwork needed to scale and replicate this approach across other departments in the country.
Dr. Annette Detken, Head of the InsuResilience Solutions Fund, said the initiative shows the important role climate risk insurance can play in protecting smallholder farmers and helping rural communities recover more quickly from drought and excess rainfall. She said the fund was 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, said lasting resilience takes more than innovative finance. It takes strong institutions and the capacity to act. He said working with the Government of Colombia was helping turn a promising pilot into a scalable climate risk financing solution for agriculture.
UNDP worked with the Ministry of Agriculture and Rural Development 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 conditions for parametric insurance to be adopted by departmental governments.