The creation of Portugal’s first intermunicipal parametric insurance policy aims to increase the value of natural capital, enable a swift response to extreme weather events and prevent irreversible ecological and financial losses.
The Pinhal Interior region is home to critical natural infrastructure that provides essential services such as water regulation, carbon sequestration, erosion control, pollination, and support for nature-based tourism. Despite these assets being estimated to have an economic value of between 51 and 172 million euros per year, they are not formally protected or accounted for, leaving them vulnerable to increasingly frequent extreme weather events.
Currently, responses to fires, droughts and storms are reactive, relying on mechanisms that arrive too late to take advantage of the critical window for ecological intervention. Effective recovery after a severe event depends on action taken in the first few weeks. When this does not happen, the land degrades, costs rise and recovery becomes more difficult, or even impossible.
The objective of this campaign is to support a pilot scheme in the Pinhal Interior region, which aims to test and validate an innovative mechanism: an inter-municipal parametric insurance. This mechanism is intended as an alternative to, or addition to, conventional insurance, providing funding within days of climatic events occurring, as defined by objective parameters such as area burnt, rainfall levels, or vegetation indicators.
This instrument addresses two structural problems: the lack of immediate liquidity following disasters, and the absence of mechanisms to safeguard natural resources. It introduces budgetary predictability by converting unpredictable public expenditure into structured costs and encourages prevention by offering premium reductions to local authorities that implement ecological management measures.
The project aligns with the European framework on nature restoration and sustainable finance, as well as initiatives already underway. These include the European PIISA project (Piloting Innovative Insurance Solutions for Adaptation), a European insurance innovation project linked to climate change adaptation. This project encourages proactive adaptation, as do other successful mechanisms such as CCRIF (the world’s first multi-country risk pool, bringing together 23 member states from Central America and the Caribbean).
It is more than just a financial instrument; it is a structural mechanism that helps safeguard public investment, reduce future costs, and enhance the value of natural capital as a strategic asset. The aim is to test this model on a controlled scale in a real-world context, thereby laying a solid foundation for future national-level replication.
We have an opportunity to trial a new approach to climate risk management in the real world. This approach is faster, more predictable, and better aligned with the value of natural capital.
The question is not if the next disaster will happen.
The question is whether we will be prepared when it does.
About the author
ADXTUR - Agency for the Tourism Development of the Schist Villages is a supra-municipal public-private regional cooperation platform that leads the Network of Schist Villages.
The network comprises 28 villages in Portugal's Central Region and around 230 public and private entities, including 20 municipalities, 5 inter-municipal communities, 7 local action groups, and over 150 companies operating in the area.
ADXTUR's mission is to generate territorial attractiveness, promoting sustainable, integrated, and participatory social and economic development. It achieves this by mobilising communities, promoting cultural identity and local resources, and creating the conditions for economic development, particularly in the tourism sector.
Since its establishment, ADXTUR has become a coordinating and strategic convergence structure in the Pinhal Interior region. It promotes concerted action between public and private stakeholders, contributing to the region's development as a place to live, invest and create.
In this project, ADXTUR acts as the coordinating body. It is responsible for liaising with the participating municipalities, coordinating the activities technically, and monitoring the implementation of the model. It also ensures communication between the various stakeholders involved, including technical bodies and potential partners from the insurance sector.
Over the years, our work has enabled us to develop an approach based on heritage preservation, the promotion of local culture, and creating wealth from the region’s resources. This has transformed the identity of these places into an asset for economic and social development.
ADXTUR also acts as an experimental agent, promoting initiatives that combine knowledge, creativity and innovation. These initiatives involve different stakeholders and stimulate new forms of territorial development.
This project is part of an initiative that addresses the region's vulnerability to climate-related risks by exploring innovative solutions to enhance its resilience and sustainability. It aligns with other projects that aim to strengthen the region’s resilience, particularly those that focus on renewable energy communities and water management and efficiency.
Budget and due dates
The requested funding of €200,000 is intended for the implementation of a pilot project focusing on critical stages of the model’s technical development. This will enable the key assumptions of parametric insurance to be tested and validated in a real-world context.
This pilot project represents an initial phase of strategic investment, aimed at reducing uncertainty, validating the model and creating the necessary conditions for future implementation across the region.
Investment allocation:
1. Technical coordination and pilot management: a dedicated coordination structure for the implementation, institutional coordination and technical monitoring of the project.
2. Assessment and preliminary analysis of natural capital: characterisation of the territory and identification of the primary natural assets to be protected.
3. Territorial risk analysis: processing historical data to identify the main climate risks.
4. Initial parametric modelling: preliminary definition of parameters (triggers), thresholds, and operating logic of the mechanism.
5. Conceptual structuring of the model (legal and financial): creation of an initial framework for the future operationalisation of the instrument.
Total: €200,000
This investment will enable the development of a robust proof of concept that focuses on the most critical technical components. This will significantly reduce the risk associated with future large-scale implementation.
Timeline (pilot: 12 months)
The pilot focuses on the initial phases of the model, which are crucial for its validation:
- Phase 0 (Months 0–2): Setting up the operational model and coordination structure
- Phase 1 (Months 2–8): Ecological baseline and territorial risk analysis (pilot scale)
- Phase 2 (Months 8–12): Initial parametric modelling and technical validation
Total duration: 12 months
This pilot phase is the first stage of the overall 30-month model and focuses on the essential steps required to validate the mechanism and prepare for its future expansion.
