Design and implementation of a voluntary collective earthquake insurance policy to cover low-income homeowners in a developing country

Mabel Marulanda (), Omar Cardona (), Miguel Mora () and Alex Barbat ()

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, 2014, vol. 74, issue 3, 2088 pages

Abstract: Understanding and evaluating disaster risk due to natural hazard events such as earthquakes creates powerful incentives for countries to develop planning options and tools to reduce potential damages. The use of models for earthquake risk evaluation allows obtaining outputs such as the loss exceedance curve, the expected annual loss and the probable maximum loss, which are probabilistic metrics useful for risk analyses, for designing strategies for risk reduction and mitigation, for emergency response strategies and for risk financing. This article presents, based on probabilistic risk models, the design and implementation of a risk transfer instrument to cover the private buildings of the city of Manizales, Colombia. This voluntary collective instrument provides financial protection to both, the estate tax payers and the low-income homeowners through a cross-subsidy strategy; besides, it promotes not only the insurance culture but also the solidarity of the community. The city administration and the insurance industry are promoting this program using the mechanism of the property tax payment. This collective insurance helps the government to access key resources for low-income householders recovery and improve disaster risk management at local level. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: Seismic risk insurance instruments; Earthquake risk model; Probable maximum loss; Expected annual loss; Risk premium; Cross-subsidy strategy (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11069-014-1291-4

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