Ecuador has introduced its first parametric insurance program to protect smallholder maize and rice farmers from climate-related risks such as floods, storms, and El Niño-driven weather events. The initiative, led by Guy Carpenter Mexico, AXA Climate, Blue Marble Microinsurance, and Campo Seguro, in partnership with the InsuResilience Solutions Fund (ISF), aims to provide affordable coverage to farmers who previously lacked access to traditional indemnity-based insurance.
Agriculture is crucial to Ecuador’s economy, supporting 17.9% of its workforce and supplying nearly 60% of essential food. However, extreme weather events threaten rural livelihoods, making risk management critical. Unlike conventional insurance, the new parametric model will offer faster payouts based on predefined weather triggers rather than damage assessments, ensuring quick financial relief for affected farmers.
A major challenge is that many smallholder farmers are unbanked, making direct payments difficult. To overcome this, the consortium is developing cash disbursement options via money orders, allowing farmers to collect funds from bank branches. Additionally, a mobile communication system will provide climate alerts, prevention tips, and payout updates, ensuring farmers stay informed.
Supported by the UNDP Ecuador office, the project aligns with climate-smart agricultural strategies and strengthens collaboration with government agencies. By integrating financial inclusion with innovative risk management, the initiative aims to build resilience in Ecuador’s agricultural sector, safeguarding farmers’ livelihoods and food security.