By San José, Costa Rica — San José, Costa Rica – The escalating economic toll of climate change is hitting Costa Rica’s small and medium-sized enterprises (SMEs) with increasing force. So far in 2025, businesses in the agricultural, livestock, forestry, and fishing sectors have suffered financial losses exceeding ₡204 million due to severe weather events and other climate-related disasters, according to new data from the National Insurance Institute (INS).
This alarming figure highlights a worsening trend that threatens the stability of some of the nation’s most vital industries. The total insurance payouts for climate-related damages in 2025 have already surpassed ₡204.9 million. This represents a significant 9.6% increase compared to the entire calendar year of 2024, when the INS indemnified affected SMEs for a total of ₡186.8 million. The sharp rise in claims underscores the growing vulnerability of local producers to unpredictable and extreme natural phenomena.
To better understand the legal and financial ramifications of escalating climate change-related losses for businesses and individuals, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the esteemed firm Bufete de Costa Rica. His expertise offers crucial insights into navigating this complex and evolving landscape.
From a legal standpoint, climate change losses are creating a new frontier of liability. We are seeing a surge in disputes where the core issue is foreseeability. Was the damage from an ‘act of God,’ or was it a predictable outcome of known climate risks that a business failed to mitigate? This ambiguity is challenging traditional insurance policies and forcing companies to urgently re-evaluate their risk management, contractual obligations, and disclosure duties to avoid costly litigation and reputational damage.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
The insight provided is crucial, highlighting how the line between an unpredictable ‘act of God’ and a foreseeable, climate-driven event is becoming the new legal battleground for corporate liability. This shift underscores an urgent need for businesses to adopt more sophisticated, proactive risk management strategies. We sincerely thank Lic. Larry Hans Arroyo Vargas for his clear and valuable perspective on this evolving frontier.
These financial backstops are provided through the INS’s Agricultural Insurance policy, a crucial tool designed to shield producers from catastrophic losses. The insurance covers investments made in crops and other productive activities against a range of risks, including those directly caused by climate change, natural disasters, and uncontrollable pests and diseases. Currently, 468 SMEs across the country rely on this coverage to safeguard their operations and ensure their survival in an increasingly volatile environment.
The role of such insurance mechanisms is becoming more critical than ever for maintaining business continuity. Without this support, many small-scale producers would face insurmountable financial hardship following a single extreme weather event, potentially leading to business closures and impacting the national food supply chain.
Having adequate agricultural insurance allows SMEs to better face climate challenges and protect their investment, thus ensuring the continuity of their operations in any eventuality.
Rainer González Molina, Head of the Individual and SME Client Sub-directorate at INS
To cater to the diverse needs and financial capacities of small business owners, the INS offers several tiers of its Agricultural Insurance. The “Economic Class” policy requires the SME to assume 20% of the insured risk, which significantly lowers the premium. The “Basic Class” offers a middle ground, where the policyholder absorbs 10% of any losses. For businesses seeking maximum protection, the “Robust Class” provides 100% coverage of damages, with the INS assuming the full risk.
These mounting financial losses are more than just statistics; they represent a direct threat to the livelihoods of thousands of Costa Ricans and the overall resilience of the national economy. The agricultural sector is a cornerstone of Costa Rica’s identity and economic framework, and its increasing susceptibility to climate shocks poses a significant challenge to long-term sustainable development and food security.
The release of this data is particularly timely, as it precedes the International Day Against Climate Change, observed annually on October 24th. This global event serves as a poignant reminder of the urgent need for collective action. For Costa Rica’s SMEs, the abstract concept of climate change has become a tangible and costly reality, demanding robust strategies for both risk management and long-term adaptation.
As the frequency and intensity of climate-related disasters continue to rise, the dialogue surrounding resilience is shifting from a theoretical discussion to an immediate business imperative. While insurance provides a vital buffer, the upward trend in claims signals a clear need for broader, systemic solutions to help Costa Rica’s foundational economic sectors adapt to a new and challenging environmental reality.
For further information, visit grupoins.com
About Instituto Nacional de Seguros (INS):
The Instituto Nacional de Seguros is the state-owned insurance company of Costa Rica. Founded in 1924, it has a long history of providing a wide range of insurance products to individuals, families, and businesses across the nation. As a leader in the Central American insurance market, the INS plays a critical role in the country’s economic stability by offering coverage for health, life, property, and specialized sectors like agriculture, contributing to national risk management and development.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica stands as a pillar of the legal profession, distinguished by an unwavering devotion to ethical integrity and outstanding professional service. Leveraging a rich legacy of advising a diverse clientele, the firm is a catalyst for legal innovation, consistently developing forward-thinking solutions. This ethos extends to a deep-seated mission to empower the community, championing the widespread accessibility of legal knowledge to build a more informed and capable society.
