Advertisement

Natural Hazards

, Volume 74, Issue 3, pp 2071–2088 | Cite as

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

  • Mabel C. MarulandaEmail author
  • Omar D. Cardona
  • Miguel G. Mora
  • Alex H. Barbat
Original Paper

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.

Keywords

Seismic risk insurance instruments Earthquake risk model Probable maximum loss Expected annual loss Risk premium Cross-subsidy strategy 

Notes

Acknowledgments

This work has been partially sponsored by DESURBS-FP7-2011-261652. The authors are also grateful for the support of the World Bank, the IDRC ECOPOLIS Graduate Research Program of Canada and of the Ministry of Education and Science of Spain, project “Enfoque integral y probabilista para la evaluación del riesgo sísmico en España”-CoPASRE (CGL2011-29063).

References

  1. AIS-300 C (1996) Estudio general de amenaza sísmica de Colombia. Asociación Colombiana de Ingeniería Sísmica, Bogotá, ColombiaGoogle Scholar
  2. Andersen TJ (2002) Innovative Financial Instruments for Natural Disaster Risk Management. Technical paper. Inter-American Development BankGoogle Scholar
  3. Banks E (2004) Alternative risk transfer: integrated risk management through insurance, reinsurance, and the capital markets. John Wiley and Sons, HobokenCrossRefGoogle Scholar
  4. Barbat AH, Pujades LG, N. L, and R. M (2006) Performance of buildings under earthquakes in Barcelona, Spain. Comput-Aid Civ Infrastruct Eng 21, 573–593Google Scholar
  5. Barbat AH, Carreño ML, Pujades LG, Lantada N, Cardona OD, Marulanda MC (2010) Seismic vulnerability and risk evaluation methods for urban areas. A review with application to a pilot area. Struct Infrastructe Eng 6:499CrossRefGoogle Scholar
  6. Birkmann J, Cardona OD, Carreño ML, Barbat AH, Pelling M, Schneiderbauer S et al (2013) Framing vulnerability, risk and societal responses: the MOVE framework. Nat Hazards 67:193–211CrossRefGoogle Scholar
  7. Cardona OD (2009) La gestión financiera del riesgo de desastres: Instrumentos financieros de retención y transferencia para la comunidad Andina. LimaGoogle Scholar
  8. Cardona OD and Marulanda MC (2010) Mecanismos financieros, seguro y reaseguro contra desastres naturales en América latina y el caribe: Experiencias Recientes. Secretaría permanente del sistema económico latinoamericano y del Caribe, SELA, CaracasGoogle Scholar
  9. Cardona OD, Ordaz MG, Moreno AM, and Yamin LE (2004) Análisis de riesgo de desastres extremos en Colombia con fines de valoración de la exposición fiscal. Informe del estudio sobre definición de la responsabilidad del Estado, su exposición ante desastres naturales y diseño de mecanismos para la cobertura de los riesgos residuales del Estado, ACCI, DNP, Banco MundialGoogle Scholar
  10. Cardona OD, Lavell AM, Mansilla E, and Moreno AM (2005a) Avances en las estrategias de desarrollo institucional y sostenibilidad financiera de la gestión del riesgo de desastres en América Latina y el Caribe. Diálogo Regional de Poítica sobre Prevención de Desastres, Banco Interamericano de Desarrollo, BID, WashingtonGoogle Scholar
  11. Cardona OD, Ordaz MG, Moreno AM, and Yamin LE (2005b) Obligaciones contingentes del Estado por desasatre, requerimiento de recursos y posibilidades de asignación. Informe del estudio sobre definición de la responsabilidad del Estado, su exposición ante desastres naturales y diseño de mecanismos para la cobertura de los riesgos residuales del Estado, ACCI-DNP, Banco MundialGoogle Scholar
  12. Cardona OD, Ordaz MG, Marulanda MC, Barbat AH (2008a) Estimation of probabilistic seismic losses and the public economic resilience: an approach for a macroeconomic impact evaluation. J Earthquake Eng 12:60–70CrossRefGoogle Scholar
  13. Cardona OD, Ordaz MG, Marulanda MC, and Barbat AH (2008b) Fiscal Impact of future earthquakes and country’s economic resilience evaluation using the disaster deficit index. 14th World Conference on Earthquake Engineering, Beijing, ChinaGoogle Scholar
  14. Cardona OD, Ordaz MG, Yamin LE, Arámbula S, Marulanda MC, and Barbat AH (2008c) Probabilistic seismic risk assessment for comprehensive risk management: modeling for innovative risk transfer and loss financing mechanisms. 14th World Conference on Earthquake Engineering. Beijing, ChinaGoogle Scholar
  15. Cardona OD, Ordaz MG, Yamin LE, Marulanda MC, Barbat AH (2008d) Earthquake loss assessment for integrated disaster risk management. J Earthquake Eng 12:48–59CrossRefGoogle Scholar
  16. Cardona OD, Ordaz MG, Reinoso E, Yamín LE, and Barbat AH (2010) Comprehensive approach for probabilistic risk assessment (CAPRA): International initiative for disaster risk management effectiveness. 14th European Conference on Earthquake Engineering, Ohrid, MacedoniaGoogle Scholar
  17. Carreño ML, Cardona OD, Barbat AH (2007) Urban seismic risk evaluation: a holistic approach. Nat Hazards 40:137–172CrossRefGoogle Scholar
  18. CEDERI (2002) Microzonificación Sísmica de la Ciudad de Manizales. Centro de Investigación en Materiales y Obras Civiles, Centro de Estudios sobre Desastres y Riesgos, Departamento de Ingeniería Civil y Ambiental, Universidad de los Andes, Bogotá, ColombiaGoogle Scholar
  19. Consorseguros (2008) La cobertura aseguradora de las catástrofes naturales. Diversidad de sistemas. Seguros CdCd, MadridGoogle Scholar
  20. Cummins JD and Mahul O (2009) Catastrophe risk financing in developing countries: principles for public intervention, World BankGoogle Scholar
  21. Egozcue JJ, Barbat AH, Canas JA, Miquel J, Banda E (1991) A method to estimate occurrence probabilities in low seismic activity regions. Earthquake Eng Struct Dynam 20:43–60CrossRefGoogle Scholar
  22. ERN (1999) Sistema para la evaluación de pérdidas por terremoto en edificaciones con fines de seguro (Version 2.5.1). BogotáGoogle Scholar
  23. ERN-AL (2011) Probabilistic modelling of disaster risk at global level: Development of a methodology and implementation of case studies. Phase 1A: Colombia, Mexico, Nepal. Background paper prepared for the 2011 Global Assessment Report on Disaster Risk Reduction. Prepared by the Consortium Evaluación de Riesgos Naturales—América Latina. UNISDR: Geneva, SwitzerlandGoogle Scholar
  24. Freeman PK, Keen M, and Mani M (2003) Dealing with increased risk of natural disasters: challenges and options. International Monetary Fund, Fiscal Affairs DeptGoogle Scholar
  25. Gallego M (2000) Estimación del riesgo sísmico en la república de colombia[Thesis]. Type, Universidad Nacional Autónoma de México, Ciudad de MéxicoGoogle Scholar
  26. Grossi P, Kunreuther H (2005) Catastrophe modeling: a new approach to managing risk. Springer, BostonCrossRefGoogle Scholar
  27. Gurenko E, Lester R, Mahul O, Gonulal S (2006) Earthquake Insurance in Turkey. History of the Turkish Catastrophe Insurance Pool. The World Bank, WashingtonCrossRefGoogle Scholar
  28. INGENIAR and ITEC (2005) Sistema de Información Sísmica de Manizales. Versión RiesgoGoogle Scholar
  29. ITEC (2004) Sistema de información Sísmica de Manizales—SISManGoogle Scholar
  30. Marulanda MC (2009) Design and implementation of a collective disaster risk transfer instrument for the insurance coverage of low-income homeowners by cross-subsidies in Manizales, Colombia: technical report. ECOPOLIS Graduate Research and Design Competition (Global). Universidad Nacional de Colombia, ManizalesGoogle Scholar
  31. Marulanda MC (2013) Modelación probabilista de pérdidas económicas por sismo para la estimación de la vulnerabilidad fiscal del Estado y la gestión financiera del riesgo soberano[Thesis]. Type, Universidad Politécnica de Cataluña (UPC), Barcelona, SpainGoogle Scholar
  32. Marulanda MC, Cardona OD, Ordaz MG, Barbat AH (2008) La gestión financiera del riesgo desde la perspectiva de los desastres: Evaluación de la exposición fiscal del estado y alternativas de instrumentos financieros de retención y transferencia del riesgo. Centro Internacional de Métodos Numéricos en Ingeniería, BarcelonaGoogle Scholar
  33. Marulanda MC, Cardona OD, Barbat AH (2009) Robustness of the holistic seismic risk evaluation in urban centers using the USRi. Nat Hazards 49:501–516CrossRefGoogle Scholar
  34. Marulanda MC, Cardona OD, Barbat AH (2010) Revealing the socioeconomic impact of small disasters in Colombia using the DesInventar database. Disasters 34:552–570CrossRefGoogle Scholar
  35. Marulanda MC, Carreño ML, Cardona OD, Ordaz MG, and Barbat AH (2013) Probabilistic earthquake risk assessment using CAPRA: application to the city of Barcelona, Spain. Natural Hazards 1–26Google Scholar
  36. Mechler R, Hochrainer S, Linnerooth-Bayer J, and Pflug G (2006) Public sector financial vulnerability to disasters: The IIASA CATSIM Model. Measuring Vulnerability to Hazards of Natural Origin: Towards Disaster Resilient Societies. Birkmann J. 380–398. United Nations University Press, TokyoGoogle Scholar
  37. Miranda E (1999) Approximate Seismic Lateral Deformation Demands in Multistory Buildings. J Struct Eng 125:417–425CrossRefGoogle Scholar
  38. Ordaz MG (2000) Metodología para la Evaluación del Riesgo Sísmico Enfocada a la Gerencia de Seguros por Terremoto. Universidad Nacional Autónoma de México, México DFGoogle Scholar
  39. Ordaz MG, Miranda E, Reinoso E, and Pérez-Rocha LE (1998) Seismic Loss Estimation Model for México City. In Universidad Nacional Autónoma de México. México DF, MéxicoGoogle Scholar
  40. Pollner JD (2001) Managing catastrophic disaster risks using alternative risk financing and pooled insurance structures. Technical paper; no. WTP 495. World BankGoogle Scholar
  41. Vargas JE (2002) Politicas Publicas para la Reduccion de la Vulnerabilidad Frente a los Desastres Naturales y Socio-naturales. Naciones Unidas, CEPAL, División de Medio Ambiente y Asentamientos HumanosGoogle Scholar
  42. Velásquez CA, Cardona OD, Mora MG, Yamin LE, Carreño ML, Barbat AH (2014) Hybrid loss exceedance curve (HLEC) for disaster risk assessment. Nat Hazards 72:25CrossRefGoogle Scholar
  43. Woo G (1999) The mathematics of natural catastrophes. Imperial College Press, LondonCrossRefGoogle Scholar
  44. Woo G (2011) Calculating catastrophe. Imperial College Press; Distributed by World scientific Publishing Co., London; SingaporeCrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  • Mabel C. Marulanda
    • 1
    Email author
  • Omar D. Cardona
    • 2
  • Miguel G. Mora
    • 1
  • Alex H. Barbat
    • 1
  1. 1.Centre Internacional de Mètodes Numèrics en Enginyeria (CIMNE)Universidad Politécnica de Cataluña (UPC)BarcelonaSpain
  2. 2.IDEAUniversidad Nacional de ColombiaManizalesColombia

Personalised recommendations