COLOMBIA Law and Practice Contributed by: Rebeca Herrera Diaz, Rebeca Herrera Abogados
007 of 2018 addressed these matters, requiring all the companies under its surveillance to implement robust cyber risk protocols and handbooks. Climate change has intensified natural disasters such as floods, landslides, and droughts, posing significant risks to insured assets. The SFC collaborates with the World Bank Group to conduct climate stress tests that assess the financial system’s resilience to envi- ronmental shocks. These tests highlighted the need to support the development of insurance products that enhance financial inclusion and protect vulner- able populations from climate-related events. A key development in Colombian law to encourage these products was the enactment of Law 2294 of 2022, which established a robust framework for developing parametric insurance in Colombia. Integrating AI and automation introduces risks related to algorithmic biases, operational errors, and ethical considerations. The SFC encourages the adoption of AI while emphasising transparency, accountabil- ity, and ethical standards. It has issued guidelines on the responsible use of AI, ensuring that automated systems do not compromise consumer rights or mar- ket stability. It is expected that Colombian financial regulation on AI and technological developments will follow the European Union guidelines, providing a set of principles defining acceptable and unacceptable practices. Longer life expectancies can strain life and health insurance products, affecting pricing, reserves, and the sustainability of pension systems. Colombian law requires insurers to incorporate updated mortality and longevity tables in their actuarial models. It also moni- tors the adequacy of reserves and solvency margins to ensure that insurers can meet long-term obliga- tions. The Colombian Congress enacted a pension law reform (Law 2381 of 2024) that imposed new risks for pension-linked insurance, such as annuities, and policies covering death and disability risks for mem- bers of private pension funds. Currently, this law is being revised by the Constitutional Court. 11.2 New Products or Alternative Solutions Beyond legislative and regulatory responses to emerg- ing risks in the insurance market, private sector and
product developments remain limited but are steadily expanding. One notable advancement is the increas- ing adoption of parametric insurance, which offers a new approach to identifying at-risk populations, par- ticularly in the context of climate change. This involves pinpointing specific climate benchmarks that could affect these populations and, through collaboration with relevant agencies, providing parametric insur- ance that triggers payouts when those benchmarks are met, thus mitigating losses. Cyber insurance has become a standard offering in Colombia, reflecting the growing prevalence of cyber risks and the increasing automation of economic activities. However, the market still lacks extensive experience in managing cyber-attack-related claims. In most cases, policyholders report incidents under the policy’s preventive coverage rather than triggering an indemnity, highlighting the need for further market maturity in this area. In the realm of alternative risk transfer (ART), large economic groups in Colombia frequently own captive insurers, typically registered in jurisdictions such as Bermuda, Delaware, and Barbados. These captives primarily serve to transfer catastrophic property risks, particularly when traditional market rates and tariffs are prohibitively high. 12. Developments in Insurance Law 12.1 Significant Legislative or Regulatory Developments On 15 October 2024, the Ministries of Finance and Commerce issued decrees 1272 and 1271, respec- tively. These decrees mark a significant shift in Colom- bia’s insurance regulatory landscape, fostering align- ment with international standards to improve financial resilience, comparability, and risk transparency in the insurance sector. Decree 1272 of 2024 of the Ministry of Finance modifies Decree 2555 of 2010. It aims to strengthen Colombia’s prudential regime for technical insurance reserves by adopting international risk-based stand- ards. The goal is to improve insurers’ estimation and management of their liabilities, ensure technical
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