Investigation of insured earthquake damage

The assessment of the loss potential caused by natural perils is a very important task for all insurance companies working in hazard-prone markets. It has to be based on two crucial items: the frequency of events and the investigation of their effects on the insured portfolio.This article deals with the second aspect, i.e. an evaluation of the insured damage caused by two earthquakes, namely those occurring near Albstadt, Germany, on 3 September 1978, and in central Chile on 3 March 1985. The results of the analysis of the earthquake in central Chile enable the mean damage ratio (damage in relation to the value) to be related to the height and the type of construction of the buildings affected. The Albstadt earthquake data permit an illustration of the effects of the type of subsoil on the mean damage ratio. The damage to individual buildings can be described by a lognormal distribution. Possible applications of these results are mentioned.