Design of a Socially Inclusive Climate Risk Transfer Mechanism: A Case Study in La Guajira, Colombia

Abstract

The primary aim of this study was to develop a model of a socially inclusive climate risk insurance (CRI) mechanism basedon the differential risk transfer approach. This study focused on the department of La Guajira, Colombia, as a case study.La Guajira is the department in Colombia that, due to its critical disaster risk conditions, presents the adequate configura-tion for implementing a climate risk transfer mechanism. The article starts by analyzing risk conditions by using secondarydata. Based on fieldwork, this research explored the perspectives of the most vulnerable sectors in La Guajira Departmenton the socioeconomic impacts and needs they experience regarding climate-related hazards, their adaptive measures forrisk reduction, and their willingness to adopt CRI. This represents the fundamental input for the formulation of the CRImodel. Consequently, this research proposed an operational structure as input for future implementations of the model. Theresults indicate that national and local disaster risk management public policies align with the sectors’ needs and priori-ties. Strengthening sectoral associations can enhance representation in CRI projects. In-kind indemnization is preferred forwomen entrepreneurs and the indigenous community. The CRI model includes a risk pool through the family compensationfund of La Guajira as a sectoral agglomerator, with contingent credit and traditional/parametric insurance. The methodologydeveloped in this study can be applied in different contexts worldwide as a guidance for informing national and internationalclimate risk finance initiatives.