Climate insurance for smallholder farmers in Indonesia: case study

This case study explores an index-based climate insurance programme for smallholder rice and maize farmers, implemented between October 2022 and August 2025 across three provinces of Indonesia — South Sulawesi, West Java-Karawang, and East Java-Malang — areas highly exposed to drought and excess rainfall driven by worsening climate change. The programme was designed as a bundled, digitally-enabled scheme to strengthen the financial resilience of smallholder farmers and enhance their capacity to recover from climate-related agricultural losses. By engaging farmers directly through commercial and non-profit distribution partners, the project aimed to test the viability of parametric insurance products, validate digital payout mechanisms, and strengthen the operational capacity of local agricultural ecosystems.

Farmers were enrolled voluntarily at the start of each cropping season and offered index-based coverage tied to satellite-measured rainfall data, bundled with loans, inputs, and advisory services on climate-smart agriculture practices. During insurance trigger events, payouts were disbursed digitally to farmers' mobile wallets or bank accounts within ten working days. Training activities equipped over 39,200 farmers with climate risk management knowledge, while 161 agents received training-of-trainers on product design and enrolment. Between March 2023 and April 2025, 7,148 farmers were insured across four agricultural seasons, with a cumulative claims ratio of 79%. After the project period, partners and governments were encouraged to reflect on strengths, gaps, and lessons — including the critical role of digital channels, the challenge of explaining parametric triggers, and the need for sustained premium subsidies and potential mandatory bundling — to improve the scale and sustainability of future climate insurance for smallholder farmers in Indonesia.