INTRODUCTION TO NATURAL HAZARD ANALYSIS

Transcription

1 INTRODUCTION TO NATURAL HAZARD ANALYSIS November 19, 2013 Thomas A. Delorie, Jr. CSP Managing Director

2 Natural Hazards Are Global and Include: Earthquake Flood Hurricane / Tropical Cyclone / Typhoon Landslides Severe Convective Storm (Tornado, Hail & Straight line winds) Sinkholes Tsunami Volcano Wildfire 1

3 Munich Re Nathan Map of Global Natural Hazards 2

4 2008 USGS United States Earthquake Seismic Hazard Map 3

5 Global Seismic Hazard Assessment Program Map 4

6 United States Flood Exposure USGS and FEMA 5

7 Hurricane / Tropical Cyclone / Typhoon 6

8 7

9 United States Landslide Exposure 8

10 61 Years of Tornado Tracks, NOAA and IDVsolutions 9

11 Noted Shift of Tornado Alley and Severity 10

12 Munich Re Nathan Global Tornado Hazard 11

13 Munich Re Nathan Global Hailstorm Hazard 12

14 Sinkholes Form in Karst Terrain - USGS Map of Karst Terrain 13

15 United States Tsunami Events - USGS 14

16 Global Tsunami Sources NOAA 1650 BC AD 15

17 United States Volcano Activity and Hazards - USGS 16

18 United States Wildfire Hazard USGS 17

19 Munich Re Nathan Global Wildfire Hazard 18

20 Which Natural Hazards Can Be Modeled There are three major natural hazard modeling companies RMS AIR EQECAT Marsh has global licenses for RMS and AIR covering: Earthquake Hurricane / Cyclone / Typhoon Severe Convective Storm (tornado, hail, straight line winds) - RMS can model all three perils together or each one separately - AIR can only model all three perils together Wildfire California only, by AIR 19

21 Global Flood Model Coverage vs Recent Flood Events 20

22 So What About Flood Modeling? Some river flood models exist for the United States and parts of Europe, but they are not recommended for the following reasons. Geographical resolution not detailed enough to account for changes in elevation on a site. Not capable of manually entering finished floor elevation Not capable of allocating values among multiple floors Recommend single site analysis - First validate exposure, then evaluate: Flood Zone Determination from Marsh Flood Zone Service Center Pictometry to determine if all or portion of parcel is in a flood zone If building(s) exposed to flooding, perform on-site analysis - Require site to obtain elevation certificate to identify finished floor elevation and 100 year flood elevation - Obtain regional Flood Insurance Study from FEMA to provide background and possibly the 500 year flood elevation 21

23 What Are the Benefits of Natural Hazard Modeling? Assist clients in quantifying their exposure and understanding carrier exposure Analysis used to make informed decisions on deductibles and limits Educate upper management and other key stakeholders on exposure and options Identify which locations are driving the natural hazard premium Focus on validating and/or enhancing data quality at these site to ensure most accurate picture and increase confidence in analysis Support other risk management objectives Business continuity planning Supply chain analysis 22

24 History of Modeling Deterministic maximum historical event Did not include probability of loss Did not include other event to impact entire portfolio Maximum credible probabilistic event (MFL) Usually has a very large return period and $$ amount Probabilistic portfolio analysis Incorporates all possible events Includes a wide range of return periods and average annual loss This is the current approach 23

25 General Modeling Limitations Earthquake damage and financial impact pertain exclusively to: Damage caused directly by earthquake induced ground motion Primary property damage and associated contents/inventory damage Fire following and sprinkler leakage usually not included in property earthquake limit Business interruption (loss of use) Hurricane damage and financial impact pertain exclusively to: Damage caused directly by hurricane induced wind forces, including wind driven rain Primary property damage and associated contents/inventory damage Storm surge usually included with flood, not named storm definition Business interruption (loss of use) 24

26 Additional General Modeling Limitations Damage and financial impact do not include secondary damage from: Fire and explosion - Fire following and sprinkler leakage could be included in earthquake modeling if desired Flooding, such as from a tsunami, or failure of flood protective device (dam, levee, sea wall, etc.) Storm surge could be included in hurricane modeling if desired Interdependencies, contingent business interruption Liabilities, fines, fees, pollution, extra expense Governmental action, code revisions, constructive loss Property of others, worker s compensation cost General liability losses by a third party 25

27 Key Parameters Impacting Earthquake Damage Building construction Load bearing structural details (what is holding up roof and floors above grade) Year built (determines what building code was in effect) Number of stories Occupancy Distance to fault Soil conditions At fault and at site Between fault and site 26

28 Key Parameter Impacting Hurricane Damage Building construction Building shell - Wall construction and coating (such as stucco) - Window impact resistance ratings Year built (determines what building code was in effect) Number of stories Occupancy Distance to coast Ground terrain roughness 27

29 Minimum Required Information Required information Building, contents and business interruption values by building/location Location information to geocode (accurately position building) - US Street address including zip code (latitude and longitude preferred) - International Latitude and longitude in decimal format (otherwise may only geocode to postal code centroid) Occupancy Critical; used to fill in missing construction features Details on how deductibles are applied, if used in analysis Storm surge included or excluded? - Normally excluded in modeling since included as part of flood sublimit Fire following and sprinkler leakage included or excluded? - Normally excluded in modeling since not part of earthquake sublimit Other special requests 28

30 Additional Required Information Primary Construction Characteristics Building structural load bearing construction Structural members holding up roof and floors above (do not use fire resistive, noncombustible, etc.) Number of stories Year built or last major structural upgrade (building code upgrade date, not date of remodel) Secondary construction characteristics (only considered if all primary construction characteristics and occupancy provided) If detailed construction not available or complete, model uses average construction for specific occupancy, usually in same in zip code region Does not default to worst case May be better or worse compared to actual 29

31 What are the deliverables from modeling? Aggregate Exceeding Probabilities (AEP) Probability loss level will be exceeded by one or more events in a year Used to choose an annual aggregate limit (earthquakes) Occurrence Exceeding Probabilities (OEP) Probability loss level will be exceeded by one event in a year Used to choose an occurrence limit (hurricanes) AEP and OEP Loss levels associated with various return periods (50, 100, 250, 500, 1000, 5000, 10,000 years) Carriers usually underwrite to 250 or 500 year return period Clients generally start and same point, and then move up or down based on budget and availability of limits Average Annual Loss (AAL) for portfolio and by location Portfolio AAL can identify base premium Location AALs can identify premium drivers 30

32 Sample AEP Output Table RETURN PERIOD YEARS ANNUAL PROBABILITY OF EXCEEDANCE GROUND UP LOSS PROJECTION LOSS PERCENT OF TOTAL VALUES 10, % $704,372, % 5, % $601,641, % 2, % $429,156, % 1, % $276,192, % % $145,648, % % $72,199, % % $19,969, % % $3,921, % 31

33