Insurance Diagnostics for Forest Conservation & Agroforestry Resilience

UNDP’s Insurance and Risk Finance Team, (https://irff.undp.org) housed within the Sustainable Finance Hub’s Private Finance portfolio, is building countries’ long-term financial resilience to an evolving risk landscape. Currently active in 39 countries, the Insurance and Risk Finance team is working with over 100 public and private partners, facilitating tailored financial protection solutions for the public sector, households, smallholder farmers, small businesses and nature. The team is creating the right environment for sovereign, sub-sovereign and inclusive insurance solutions to scale, working with governments to develop supportive insurance regulations and policies, and building the capacity of local industry to develop inclusive products, services and distribution channels. The insurance and risk finance work contributes to the Sustainable Finance Hub’s public, private and global policy portfolios, with the team also providing technical assistance to help governments integrate risk finance and insurance into all aspects of public financial planning and management.

In this context, ForestFlow is a regional UNDP-led initiative, led by UNDP’s Regional Bureau for Latin America and the Caribbean (RBLAC) in collaboration with the UNDP Planet Hub and the Sustainable Finance Hub and supported by Germany’s International Climate Initiative (IKI). It is designed to develop and scale integrated financial solutions that support the conservation, restoration, and sustainable management of forest landscapes in Costa Rica, Guatemala, and Honduras. These countries share interconnected forest ecosystems, similar drivers of deforestation, and a strong reliance on agroforestry-based livelihoods, while also facing high exposure to climate variability and shocks. Despite notable progress in forest governance, incentive mechanisms, and REDD+ readiness, they continue to face structural challenges, including fragmented financial systems, limited alignment between public incentives and private investment, significant green financing gaps, and underdeveloped insurance markets that leave both producers and conservation efforts vulnerable to climate and market risks. At the same time, evolving global requirements for deforestation-free supply chains and strengthened climate and biodiversity commitments are increasing the urgency for more resilient and integrated financing approaches. In this context, ForestFlow aims to bridge these gaps by aligning Payments for Ecosystem Services (PES), climate and biodiversity finance, green credit, digital monitoring systems, agricultural traceability, and risk transfer mechanisms like parametric insurance within a coherent financial architecture. 

The overall objective of this assignment is to undertake a comprehensive country-level diagnostic of risk exposure, insurance market readiness, institutional capacity, and enabling conditions to inform the integration of insurance and risk finance solutions within the ForestFlow financial architecture in Costa Rica, Guatemala, and Honduras. The assessment will provide the analytical foundation for designing insurance solutions that support forest conservation, agroforestry, and climate-resilient rural livelihoods while strengthening local institutional capacity and market readiness for implementation. Based on the findings, the assignment will also outline a four-year pathway identifying priority actions and indicative investment needs for advancing insurance solutions under ForestFlow.

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