Parametric weather index insurance solution for Ecuador’s rice and maize smallholder farmers
Agriculture is key to Ecuador's economy and food security, providing income for 17.9% of the country's economically active population and producing nearly 60% of the food in Ecuadorian families' basic food basket. Maize and rice, two staple crops, are vital to the livelihoods of smallholder farmers, who depend heavily on these commodities for both consumption and income. However, Ecuador's agricultural sector faces mounting challenges due to natural hazards, including floods, storms, and El Niño-induced extreme weather events, which threaten rural communities and their economic stability.
To protect smallholder maize and rice farmers from climate-related hazards, the InsuResilience Solutions Fund (ISF) has partnered with an international consortium led by Guy Carpenter Mexico, AXA Climate, Blue Marble Microinsurance, and Campo Seguro, acting on behalf of Ecuador's Ministry of Agriculture and Livestock (MAG), to develop the country's first parametric insurance solution for smallholder farmers.
Although the Campo Seguro programme currently offers agricultural indemnity-based insurance to small, medium and large farmers, a large number of smallholder farmers are unable to enroll in this scheme. The new product aims to bridge this gap by providing direct, affordable insurance coverage to those at the base of the economic pyramid, ensuring that even the most vulnerable farmers have a safety net against climate-related risks. This will also be the first experience with parametric insurance for Ecuador.
Additionally, the United Nations Development Programme (UNDP) Ecuador office will support the consortium in aligning the project with climate-smart agricultural practices and fostering collaboration with government institutions.
One significant challenge is the lack of payment reception capabilities among smallholder farmers, many of whom are unbanked. To address this, the consortium is exploring innovative payout mechanisms, such as money orders. This approach will enable beneficiaries to receive cash directly at any bank branch, ensuring that insurance payouts remain accessible even in remote areas.
To further enhance the programme's reach and effectiveness, the consortium will establish communication channels with beneficiaries via mobile phones. These channels will deliver climate alerts, prevention messages, and payout-related information, ensuring farmers are informed and supported throughout the process. This initiative represents a significant step forward in protecting Ecuador's smallholder farmers from the impacts of climate change. By combining innovative risk management tools with targeted capacity building and financial inclusion strategies, the project aims to build resilience among the country's most vulnerable communities, ensuring a more secure future for Ecuador's agricultural sector and the families who depend on it.