The Global Earthquake Vulnerability Estimation System (GEVES): an approach for earthquake risk assessment for insurance applications

For the insurance and reinsurance industries, earthquake loss estimation is crucial not only to adequately price its product but also to manage the accumulation risk in the face of the ever-increasing exposure in highly seismic regions. Changes in the built environment and a continuously evolving earthquake science make it a necessity for the industry to constantly refine earthquake loss estimation models. In particular, it has been recognized for a long time that the vulnerability of buildings to ground shaking is a key parameter in any earthquake risk model. Current methods tend either to rely on the limited historical damage and loss data or on the numerical simulation of the response of individual buildings to the ground-shaking produced by earthquakes. Although both methods have their advantages and pitfalls, we are proposing here a simple solution, using transparent input data, that can be realistically used for the needs of the insurance and reinsurance industry, whether detailed information about the insured structures is available or not. The resulting product is known as GEVES (Global Earthquake Vulnerability Estimation System). It is primarily intended for evaluating the mean damage ratio (MDR) suffered by a portfolio of buildings classified by use, under the action of a given earthquake scenario (i.e. an earthquake of given size at a given distance from the portfolio of buildings). A key assumption was that macroseismic intensity rather than spectral displacement would be the basis of loss estimation. The paper describes the model with emphasis on its structure and the justification for the assumptions made. In addition to a new set of earthquake vulnerability functions, the paper also provides recommendations on some aspects of the earthquake hazard, in particular about how to define macroseismic intensity at the site of interest, for a given earthquake scenario. This paper also discusses validation of the GEVES model against calculated vulnerability approaches, and the treatment of uncertainty within the model.     

Evolution of seismic risk management for insurance over the past 30 years

During the past 30 years, there has been spectacular growth in the use of risk analysis and risk management tools developed by engineers in the financial and insurance sectors. The insurance, the reinsurance, and the investment banking sectors have enthusiastically adopted loss estimation tools developed by engineers in developing their business strategies and for managing their financial risks. As a result, insurance/reinsurance strategy has evolved as a major risk mitigation tool in managing catastrophe risk at the individual, corporate, and government level. This is particularly true in developed countries such as US, Western Europe, and Japan. Unfortunately, it has not received the needed attention in developing countries, where such a strategy for risk management is most needed. Fortunately, in the last five years, there has been excellent focus in developing "Insur Tech" tools to address the much needed "Insurance for the Masses", especially for the Asian Markets. In the earlier years of catastrophe model development, risk analysts were mainly concerned with risk reduction options through engineering strategies, and relatively little attention was given to financial and economic strategies. Such state-of-affairs still exists in many developing countries. The new developments in the science and technologies of loss estimation due to natural catastrophes have made it possible for financial sectors to model their business strategies such as peril and geographic diversification, premium calculations, reserve strategies, reinsurance contracts, and other underwriting tools. These developments have not only changed the way in which financial sectors assess and manage their risks, but have also changed the domain of opportunities for engineers and scientists.This paper will address the issues related to developing insurance/reinsurance strategies to mitigate catastrophe risks and describe the role catastrophe risk insurance and reinsurance has played in managing financial risk due to natural catastrophes. Historical losses and the share of those losses covered by insurance will be presented. How such risk sharing can help the nation share the burden of losses between tax paying public, the "at risk" property owners, the insurers and the reinsurers will be discussed. The paper will summarize the tools that are used by the insurance and reinsurance companies for estimating their future losses due to catastrophic natural events. The paper will also show how the results of loss estimation technologies developed by engineers are communicated to the business flow of insurance/reinsurance companies. Finally, to make it possible to grow "Insurance for the Masses – IFM", the role played by parametric insurance products and Insur Tech tools will be discussed.     

Engineering models for catastrophe risk and their application to insurance

Internationally earthquake insurance, like all other insurance (fire, auto), adopted actuarial approach in the past, which is, based on historical loss experience to determine insurance rate. Due to the fact that earthquake is a rare event with severe consequence, irrational determination of premium rate and lack of understanding scale of potential loss led to many insurance companies insolvent after Northridge earthquake in 1994. Along with recent advances in earth science, computer science and engineering, computerized loss estimation methodologies based on first principles have been developed to the point that losses from destructive earthquakes can be quantified with reasonable accuracy using scientific modeling techniques. This paper intends to introduce how engineering models can assist to quantify earthquake risk and how insurance industry can use this information to manage their risk in the United States and abroad. Supported partially by: Institute of Engineering Mechanics, CSB     

地震保险中经济损失和赔付问题的研究

简单介绍了国内外地震保险业的发展和现状,以及基于地震危险性分析和结构易损性分析的经济损失评估方法;着重探讨了给定赔付政策下单体房屋结构震害损失赔付的概率密度函数,和保险业关心的多个单体集合赔付的整体方差问题;引入了美国使用的单体结构间损失的相关系数,并据此解释了地震保险中风险的高聚合性质. 为我国地震保险业中的赔付和费率厘定提供依据,为地震保险工作的实际运作和展开提供参考.      

Response spectrum predictions for potential near-field and far-field earthquakes affecting Hong Kong: rock sites

To realistically assess the seismic risk relating to built infrastructures in Hong Kong and in the neighbouring coastal cities of southern Guangdong province, it is necessary to predict ground shaking induced by different earthquake scenarios with good accuracy. A companion paper has described the modelling of the spatial and temporal distribution of the diffused seismic activities in the region, based on the newly-developed ‘Expanding Circular Disc’ (ECD) method. Representative Magnitude–Distance (M–R) combinations for both near-field and far-field earthquakes (in relation to Hong Kong) have been derived using the ECD method. The present paper describes the modelling of the response spectrum on rock sites associated with the predicted M–R combinations, using the Component Attenuation Model (CAM) that was also developed recently by the authors, based on stochastic simulations of the seismological model. The significant effects of soil resonance on the response spectrum are described in a separate publication.The accuracy of CAM in modelling ground motion properties on rock sites has been tested here by comparisons with (i) strong motions recorded in Taiwan and South China from the 1999 ‘Chi-Chi’ earthquake in Taiwan (M=7.6), (ii) motions recorded in South China from another earthquake occurring in the southern Taiwan Strait in the same year (M=5.1), and (iii) historical seismic intensity data obtained within South China. The overall capability of CAM in modelling both near-field and far-field attenuation has been shown to be unmatched by existing empirical models. Results of the comparison studies confirm the accuracy of CAM, particularly within an epicentral distance of 300–400 km.This study shows that the developed serviceability response spectra (i.e. at short return periods) are controlled mainly by the earthquake recurrence behaviour of major distant seismic sources. In contrast, the ultimate response spectra (i.e. at long return periods) relate to events with magnitudes close to the maximum credible earthquake (MCE) limit, the effect of which may also be represented by the Characteristic Response Spectrum (CRS). Both types of earthquake scenario can be significantly affected by the regional crustal properties. The proposed response spectrum envelopes have been compared with previously developed recommendations, and a critical review has been conducted. The intrinsic advantages of the ECD–CAM modelling approach have been highlighted, emphasising its directness and transparency when compared with the more complex process required to implement traditional Probabilistic Seismic Hazard Assessment (PSHA).     

Study on financial loss and its adjustment in earthquake insurance

Introduction Earthquake often brings large catastrophe to the mankind, especially in recent years when a large number of destructive earthquakes occur in the whole globe, which have caused tremendous casualties and losses to the people. Obviously, it is not very reasonable to make up financial losses and carry out post-seismic reconstruction by the government only for such kind of huge earth- quake losses. Therefore, as an effective measure to raise fund and make up financial losses, earth- qu…     

Earthquake loss estimation for the New York City Metropolitan Region

This study is a thorough risk and loss assessment of potential earthquakes in the NY–NJ–CT Metropolitan Region. This study documents the scale and extent of damage and disruption that may result if earthquakes of various magnitudes occurred in this area. Combined with a detailed geotechnical soil characterization of the region, scenario earthquakes were modeled in HAZUS (Hazards US), a standardized earthquake loss estimation methodology and modeling program. Deterministic and probabilistic earthquake scenarios were modeled and simulated, which provided intensities of ground shaking, dollar losses associated with capital (the building inventory) and subsequent income losses. This study has also implemented a detailed critical (essential) facilities analysis, assessing damage probabilities and facility functionality after an earthquake. When viewed in context with additional information about regional demographics and seismic hazards, the model and results serve as a tool to identify the areas, structures and systems with the highest risk and to quantify and ultimately reduce those risks.     

建筑物地震保险的若干问题

将商业保险引入建筑物防震减灾是减少地震损失的一种有效经济手段。对建筑物地震保险进行讨论,对地震保险的形式、承保—理赔机制、保险基金等主要问题作了详细的阐述,建议将年震害期望损失比作为纯费率厘定的主要原则,同时以未来一段时间内的最大期望损失率估算地震保险基金的规模。     

Earthquake insurance portfolio analysis of wood-frame houses in south-western British Columbia,Canada

Earthquake disasters affect many structures and infrastructure simultaneously and collectively, and cause tremendous tangible and intangible loss. In particular, catastrophic earthquakes impose tremendous financial stress on insurers who underwrite earthquake insurance policies in a seismic region, resulting in possible insolvency. This study develops a stochastic net worth model of an insurer undertaking both ordinary risk and catastrophic earthquake risk, and evaluates its solvency and operability under catastrophic seismic risk. The ordinary risk is represented by a geometric Brownian motion process, whereas the catastrophic earthquake risk is characterized by an earthquake-engineering-based seismic loss model. The developed model is applied to hypothetical 4000 wood-frame houses in south-western British Columbia, Canada, to investigate the impact of key insurance portfolio parameters to insurer’s ruin probability and business operability. The analysis results indicate: (i) the physical effects of spatially correlated ground motions and local soil conditions at insured properties are significant; (ii) the insurer’s earthquake risk exposure depends greatly on insurance arrangement (e.g. deductible and cap); and (iii) the maintenance of sufficient initial surplus is critical in keeping insurer’s insolvency potential reasonably low, while volatility of non-catastrophic risk is the key for insurer’s business stability. The results highlight the importance of adequate balance between business stability under normal conditions and solvency under extreme conditions for efficient earthquake risk management. Flexibility for determining an insurance arrangement would be beneficial for insurers to enhance their portfolio performance and to offer more affordable coverage to their clients.     

汶川地震后我国再保险体系在巨灾风险管理中的定位设想

汶川地震表明,我国再保险体系在巨灾保险补偿中发挥的作用十分有限,这激发我们思考这样的问题:应怎样建立有效的巨灾风险分散机制来支撑和促进再保险体系的发展。为此,提出这样的研究设想,从汶川地震为出发点,结合我国巨灾保险的实践经验,整合保险及相关行业的技术优势,从管理制度、技术和风险管理三个层面深入研究我国再保险体系在巨灾风险管理中的作用,以期得出新的建议或改善措施。(1)制度层面:对比国外和我国在地震、洪水、干旱、台风等巨灾再保险管理方面的法律规定,结合政治制度的差别,总结出具有中国特色的巨灾风险管理体系的政策依据。(2)技术层面:以地震风险为突破口,兼顾洪水、干旱、台风风险,探讨如何建立拥有自主知识产权的巨灾风险分析模型及数据库。(3)管理层面:分析巨灾保险在巨灾条件下失灵的深层次原因,论证再保险体系在巨灾风险分散机制中的重要作用,提出我国巨灾风险管理体系的基本框架。     

The October 4th, 1983 — Magnitude 4 earthquake in Phlegraean Fields: Macroseismic survey

On Oct. 4th, 1983 the area of Phlegraean Fields, near Naples (Southern Italy) was shaked by an earthquake of magnitude (M _L) 4.0 that caused some damage in the town of Pozzuoli and its surroundings. This seismic event was the largest one recorded during the recent (1982–84) inflation episode occurred in the Phlegraean volcanic area, and a detailed macroseismic reconstruction of the event was carried out.Failing macroseismic data on other earthquakes occurred in Phlegraean Fields, the attenuation law of the intensity as a function of the distance as obtained for the Oct. 4th earthquake was compared with those obtained for other volcanic areas in central Italy —i.e., Tolfa, Monte Amiata — in order to check the reliability of the results obtained for Phlegraean Fields.The Blake's model of the earthquake of Oct. 4th, 1983 does not agree with the experimental data because isoseismals contain areas larger than those shown by the model. This result has been interpreted as an effect of energy focusing due to a reflecting layer 6–8 km deep.     

建筑物地震损失风险与保险费用的确定方法

本文结合我国地震危险性和建筑物抗震设防标准提出了地震损失风险评估概率模型,并给出了建筑物地震保险金额和保险费率的计算方法。用该方法可以计算各类建筑物的保险费用,计算结果与国际地震保险业的经验数据较一致。同时,本文还利用GIS技术展示了与保险金额和保险费率的空间分布状态相关的属性数据,为保险当事人提供了实施地震保险的科学依据。     

The impact of epistemic uncertainty on an earthquake loss model

Models capable of estimating losses in future earthquakes are of fundamental importance for emergency planners, for the insurance and reinsurance industries, and for code drafters. Constructing a loss model for a city, region or country involves compiling databases of earthquake activity, ground conditions, attenuation equations, building stock and infrastructure exposure, and vulnerability characteristics of the exposed inventory, all of which have large associated uncertainties. Many of these uncertainties can be classified as epistemic, implying—at least in theory—that they can be reduced by acquiring additional data or improved understanding of the physical processes. The effort and cost involved in refining the definition of each component of a loss model can be very large, for which reason it is useful to identify the relative impact on the calculated losses due to variations in these components. A mechanically sound displacement‐based approach to loss estimation is applied to a test case of buildings along the northern side of the Sea of Marmara in Turkey. Systematic variations of the parameters defining the demand (ground motion) and the capacity (vulnerability) are used to identify the relative impacts on the resulting losses, from which it is found that the influence of the epistemic uncertainty in the capacity is larger than that of the demand for a single earthquake scenario. Thus, the importance of earthquake loss models which allow the capacity parameters to be customized to the study area under consideration is highlighted. Copyright © 2005 John Wiley & Sons, Ltd.     

Evaluation of analytical methodologies used to derive vulnerability functions

The recognition of fragility and vulnerability functions as a fundamental tool in seismic risk assessment has led to the development of more and more complex and elaborate procedures for their computation. Although these functions have been traditionally produced using observed damage and loss data, more recent studies propose the employment of analytical methodologies as a way to overcome the frequent lack of post‐earthquake data. The variation of the structural modelling approach on the estimation of building capacity has been the target of many studies in the past; however, its influence on the resulting vulnerability model for classes of buildings, the impact in loss estimations or propagation of the uncertainty to the seismic risk calculations has so far been the object of limited scrutiny. In this paper, an extensive study of static and dynamic procedures for estimating the nonlinear response of buildings has been carried out to evaluate the impact of the chosen methodology on the resulting capacity, fragility, vulnerability and risk outputs. Moreover, the computational effort and numerical stability provided by each approach have been evaluated and conclusions drawn regarding the optimal balance between accuracy and complexity. Copyright © 2013 John Wiley & Sons, Ltd.     

地震保险的政策性与商业性探讨

地震是群灾之首,一次破坏性地震可以造成巨大的生命和财产损失。地震保险风险责任大,是保险公司难以独立承担的业务,必然亏损;单位或个人心存侥幸,不愿投保。这种逆向选择的局面严重制约了地震保险业的发展。随着时代的进步和科学技术的发展,地震保险离我们愈近,本文就地震保险的政策引导和商业盈利进行探讨,提出建立灾害基金,政策性强制保险及保险公司非盈利性经营的一些看法。     

Seismicity, seismic input and site effects in the Sahel—Algiers region (North Algeria)

Algiers city is located in a seismogenic zone. To reduce the impact of seismic risk in this Capital city, a realistic modelling of the seismic ground motion (SGM) is conducted by using the hybrid method that combines the finite differences method and the modal summation. For this purpose, a complete database of geological, geophysical and earthquake data is constructed. A critical re-appraisal of the seismicity of the zone [2.25°E–3.50°E, 36.50°N–37.00°N] is performed and an earthquake list, for the period 1359–2002, is compiled. The analysis of existing and newly retrieved macroseismic information allowed the definition of earthquake parameters of macroseismic events for which a degree of reliability is assigned. Geological cross sections have been built up to model the SGM in the city, caused by the 1989 Mont-Chenoua and the 1924 Douéra earthquakes. Synthetic seismograms and response spectral ratio is produced for Algiers, and they show that the soft sediments in Algiers centre are responsible of the noticed amplification of the SGM.     

Deterministic Earthquake Scenarios for the City of Sofia

— The city of Sofia is exposed to a high seismic risk. Macroseismic intensities in the range of VIII – X (MSK) can be expected in the city. The earthquakes that can influence the hazard in Sofia originate either beneath the city or are caused by seismic sources located within a radius of 40 km. The city of Sofia is also prone to the remote Vrancea seismic zone in Romania, and particularly vulnerable are the long-period elements of the built environment. The high seismic risk and the lack of instrumental recordings of the regional seismicity make the use of appropriate credible earthquake scenarios and ground-motion modelling approaches for defining the seismic input for the city of Sofia necessary. Complete synthetic seismic signals, due to several earthquake scenarios, were computed along chosen geological profiles crossing the city, applying a hybrid technique, which combines the modal summation technique and finite differences. The modelling takes into account simultaneously the geotechnical properties of the site, the position and geometry of the seismic source and the mechanical properties of the propagation medium. Acceleration, velocity and displacement time histories and related quantities of earthquake engineering interest (e.g., response spectra, ground-motion amplification along the profiles) have been supplied. The approach applied in this study allows us to obtain the definition of the seismic input at low cost, exploiting large quantities of existing data (e.g. geotechnical, geological, seismological). It may be efficiently used to estimate the ground motion for the purposes of microzonation, urban planning, retrofitting or insurance of the built environment, etc.     

Deviation Analysis on Willingness and Behavior of Residents' Earthquake Insurance Purchasing?Based on Logit Model

为真实了解和深入研究居民地震保险购买意愿与行为的背离现象及其形成机制,以全国不同省份居民作为研究对象,开展专项问卷调查,并采用Logit模型进行回归分析,提出提升居民购买地震保险意愿并付诸行动的相关建议。研究结果表明,居民对地震断裂带的判断属于地震风险感知变量,对投保意愿和购买行为均产生显著的正向影响;是否购买其他保险和是否通过网络捐款属于普通风险感知变量,对投保意愿产生显著的正向影响,对购买行为产生正向影响但不显著;地震风险感知变量既可增强居民的投保意愿,又可促使居民付诸实际购买行动;普通风险感知变量虽能增强居民的投保意愿,但对购买行为无效力,使投保意愿和购买行为表现出一定程度的背离。     

Pore-fluid pressures and frictional heating on a fault surface

This study considers the effects of heat transfer and fluid flow on the thernal, hydrologic, and mechanical response of a fault surface during seismic failure. Numerical modeling techniques are used to account for the coupling of the thermal, fluid-pressure, and stress fields. Results indicate that during an earthquake the failure surface is heated to a tempeature required for the thermal expansion of pore fluids to balance the rate of fluid loss due to flow and the fluid-volume changes due to pore dilatation. Once this condition is established, the pore fluids pressurize and the shear strength decreases rapidly to a value sufficient to maintain the thermal pressurization of pore fluids at near-lithostatic values. If the initial fluid pressure is hydrostatic, the final temperature attained on the failure surface will increase with depth, because a greater pressure increase can occur before a near-lithostatic pressure is reached. The rate at which thermal pressurization proceeds depends primarily on the hydraulic characteristics of the surrounding porous medium, the coefficient of friction on the fault surface, and the slip velocity. If either the permeability exceeds 10^–15 m² or the porous medium compressibility exceeds 10^–8 Pa^–1, then frictional melting may occur on the fault surface before thermal pressurization becomes significant. If the coefficient of friction is less than 10^–1 and if the slip velocity is less than 10^–2 msec^–1, then it is doubtful that either thermal pressurization or frictional melting on the fault surface could cause a reduction in the dynamic shear strength of a fault during an earthquake event.     

Modelling Seismic Hazard in Earthquake Loss Models with Spatially Distributed Exposure

The prediction of possible future losses from earthquakes, which in many cases affect structures that are spatially distributed over a wide area, is of importance to national authorities, local governments, and the insurance and reinsurance industries. Generally, it is necessary to estimate the effects of many, or even all, potential earthquake scenarios that could impact upon these urban areas. In such cases, the purpose of the loss calculations is to estimate the annual frequency of exceedance (or the return period) of different levels of loss due to earthquakes: so-called loss exceedance curves. An attractive option for generating loss exceedance curves is to perform independent probabilistic seismic hazard assessment calculations at several locations simultaneously and to combine the losses at each site for each annual frequency of exceedance. An alternative method involves the use of multiple earthquake scenarios to generate ground motions at all sites of interest, defined through Monte–Carlo simulations based on the seismicity model. The latter procedure is conceptually sounder but considerably more time-consuming. Both procedures are applied to a case study loss model and the loss exceedance curves and average annual losses are compared to ascertain the influence of using a more theoretically robust, though computationally intensive, procedure to represent the seismic hazard in loss modelling.An erratum to this article can be found at