The Páramo Wildfire Resilience Facility provides rapid funding for early response and long-term resilience against wildfire damage and human-induced degradation in Colombia’s Páramos ecosystems. It ensures these rich habitats gain the protection they require and strengthens their ability to reduce risks while promoting conservation in a sustainable and equitable way. 

Páramos are high-altitude ecosystems that provide essential ecosystem services, such as water capture, storage and regulation across the Andean region. While they cover 2% of Colombia’s territory, they supply over 70% of the country’s drinking water. Despite their significance, páramos face chronic threats like land degradation and acute threats like catastrophic wildfires. Rising temperatures, reduced rainfall, and stronger winds during prolonged El Niño events have intensified wildfires, which are further exacerbated by under-resourced emergency response and fragmented governance of land in páramos. To ensure the long-term resilience of páramo ecosystems, dedicated efforts are needed to reduce wildfire risks, deploy timely f ire suppression efforts when they occur, and restore degraded ecosystems afterwards. Yet, the country faces an annual USD 500 million gap for disaster response.

A first-of-its-kind, the Páramo Wildfire Resilience Facility bundles risk transfer and risk reduction instruments under a unified governance structure to close financing gaps and enhance the long-term resilience of páramos and communities. The parametric insurance provides rapid, pre-arranged funding to transfer risk of wildfire damaging critical ecosystems for water provision from ecosystem service beneficiaries to insurers. The adaptation and recovery trust fund invests in wildfire risk mitigation and ecosystem restoration to reduce the risk of catastrophic wildfires over time, contributing to long-term water security and the financial sustainability of the parametric insurance. The Facility also coordinates targeted resilience building activities across different actors, bridging critical governance gaps.

Between November 2023 and January 2024, more than 340 fires destroyed over 17,000 hectares of forest in Colombia, overwhelming government funds and forcing the repurposing of equipment like crop-spraying planes for wildfire suppression.

Against this backdrop, the Páramo Wildfire Resilience Facility offers a timely solution through its pilot in Bogotá, where páramos cover 24% of the surrounding watershed and provide all the city’s drinking water. Between 1985 and 2022, wildfires affected nearly a third of this area. The pilot will mobilize USD 1.3 million, with more than half of it from companies dependent on páramos for water. It will strengthen water security for over 12 million people and offer a critical proof-of-concept for conserving natural ecosystems through insurance innovation.

The instrument introduces a novel financial structure to deploy capital before, during and after a catastrophic wildfire. The Facility has two components:

1. A Wildfire Parametric Insurance that will unlock liquidity for emergency response and fire suppression during a wildfire. Payouts will be disbursed within 24 hours when parameters indicative of high-intensity, high burn severity fires are met. Premiums are paid by ecosystem service beneficiaries, including utilities and large corporates dependent on water from páramos. Payouts will be directed to fire brigades and ecosystem stewards to cover required equipment and personnel to minimize wildfire impact.
2. An Adaptation and Recovery Trust Fund that will finance wildfire risk reduction and resilience-building strategies. It will fund pre-emptive activities to mitigate fire risk, like dry vegetation removal and capacity-building for local communities; as well as post-fire ecosystem rehabilitation. After the pilot, the trust fund will incorporate revenue-generating alternatives like habitat banks and result-based financing for sustainable productive activities in páramos.

The Facility will be managed jointly by Strata Advisors and Bogotá’s Water Fund, with technical advisory from leading scientists and fire brigades.