Agriculture%20and%20Adaptation%20to%20Climate%20Change%3A%20The%20Role%20of%20Insurance%20in%20Risk%20Management%3A%20The%20Case%20of%20Colombia

Technical Notes

Agriculture and Adaptation to Climate Change: The Role of Insurance in Risk Management: The Case of Colombia


CODE: IDB-TN-731
PUBLISHED: July 2015
LANGUAGE: English
RELATED TOPICS: Microeconomics
DOWNLOAD FILE IN: English

Abstract:

Insurance can potentially play an important role in climate change adaptation for rural households in developing countries as part of the overall climate change adaptation strategy. However, agricultural insurance markets have many market failures that inhibit their full development. In Colombia these market failures, namely information asymmetries and high transaction costs, are amplified by the country’s difficult topography, poor infrastructure, and history of rural violence. Even though the government provides premium subsidies to increase coverage, it is still very low and important crops and small producers are not covered. This paper analyzes in detail the market constraints on the development of the agricultural insurance market in Colombia and provides recommendations so that it can fulfill its potential as a risk management tool in the country.

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