Climate change impacts are already felt across many vulnerable developing countries and are projected to have particularly devastating effects on economies and people relying heavily on agriculture and natural resources. In Sri Lanka, the impacts of climate change, the COVID-19 pandemic, and the current economic difficulties have highlighted the need for enhancing existing risk management and protection systems, including robust risk transfer solutions.

Risk transfer instruments such as insurance mechanisms can be part of an effective and comprehensive climate risk management framework for countries and regions and can help to protect and build the resilience of individuals, households, communities, and economic sectors.

This paper provides an overview of the enabling environment for agricultural risk transfer in Sri Lanka and identifies potential ways to increase insurance market penetration for smallholder farmers in the country, particularly related to legal and regulatory frameworks and the potential introduction of new and innovative insurance products.

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