Design and implementation of seismic risk insurance to cover low-income homeowners by a cross-subsidy strategy

摘要

This paper discusses how a catastrophe risk model -based on metrics such as the Probabilistic Maximum Loss and the Average Annual Loss- has been used to estimate, building by building, the probabilistic losses, of different portfolios of exposed elements. It also explains how a risk transfer instrument to cover the private housing in Manizales, Colombia, was designed, promoting the insurance culture and covering the low-income homeowners through a cross-subsidy strategy. This instrument is a voluntary collective insurance promoted by the city administration and the insurance industry, using the mechanism of the property-tax payment. The program provides financial protection not only to the estate-tax payers but also to the low-income homeowners that cannot pay the tax due to their income limitations. This collective insurance helps the government to access key resources for low-income householder recovery and improve disaster risk management at local level.