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 probabil-istic losses of different portfolios of exposed elements. It also explains how a risk transfer instrument for the coverage of the private housing in two cities of Colombia –Manizales and Bogota– was designed, promoting the insurance culture and covering the low-income homeowners through a cross-subsidy strategy. This in-strument is a voluntary collective insurance promoted by the city administration and the insurance industry, using the mechanism of the estate-tax payment. The program provides the financial protection not only of the estate-tax payers but also of the low-income homeowners that cannot pay the tax due to their income limita-tions. This collective insurance helps the government to access key resources for the low-income householder recovery and improve disaster risk management at local level.