Earthquake Risk Assessment and its Application to Insurance Anselm Smolka GeoRisks Research Group Munich Reinsurance Company

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1 Earthquak Risk Assssmnt and its Application to Insuranc Anslm Smolka GoRisks Rsarch Group Munich Rinsuranc Company 1 Workshop Stahl & Vrbund/Earthquak Enginring, Univrsität Kassl, Jun 23rd, 2003

2 Contnts 1. Earthquak losss trnds and causs 2. Earthquak risk and its componnts 3. Loss prvntion 4. Modlling arthquak risk 5. Insuranc aspcts 2

3 Earthquak losss trnds and causs Grat Earthquak Disastrs Billion US$ (2002 valus) Economic losss Insurd losss Avrag conomic losss pr dcad As of Fbruary 12, GoRisks Rsarch Dpt., Munich R Yar 3

4 Grat Earthquak Disastrs Dcad comparison Dcad Dcad Dcad Dcad Dcad last Factor 80's:70's Factor last 10:70's Numbr ,1 0,7 Economic losss 0,9 21,5 56,9 85,5 227,7 217,1 1,5 3,8 Insurd losss 0 0,06 0,92 3,42 24,37 24,39 3,7 26,5 Losss in Mio. US$ valus NatCatSERVICE As of January30, Go Risks Rsarch Dpt., Munich R 4

5 Natural disastrs incras dramatically in rspct of frquncy and losss Th rasons: Global population incras Incrasing living standard Concntration of population and valus in urban cntrs Sttlmnt and industrialisation of highly xposd rgions Vulnrability of modrn socitis and tchnologis Environmntal chang 5

6 Urban growth and its consquncs Population prssur => compting with tim => dficincis in quality of xcution cod complianc quality control Economic constraints 6

7 Urban growth Izmit/Turky, Aug 17,

8 Vulnrability of modrn socitis Infrastructur problms. nrgy and watr supply. transport routs. tlcommunication => Matrial supply ( just-in-tim... ), businss intrruption (on local and global scal) 8

9 Chi-Chi arthquak Taiwan, Spt 21,

10 High Tch Park Hsin-chu/Taiwan Hochtchnologi = hohs Risiko? 10

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13 Earthquak risk and its componnts Hazard = occurrnc probability for vnt of a crtain siz Risk = f Vulnrability of buildings, contnts, BI valus 13

14 RISK hazard shaking (macrozonation) scondary ffcts (microzonation) vulnrability buildings contnts businss intrruption xposd valus DAMAGE 14

15 Hazard Ground shaking = function of Magnitud Distanc Duration of strong ground motion Strngth and numbr of aftrshocks Gological conditions on th wav path Subsoil conditions at th sit Frquncy/priod of ground motion 15

16 Sismic Intnsity Shaking Map for San Francisco, CA (1989 Loma Prita arthquak) 16

17 Earthquak / Basic Trms Magnitud Physical masur of th sismic wav nrgy mittd from th focus Calculatd on th basis of instrumntal rcords (sismograms), thrfor "objctiv" Continuous, logarithmic Richtr scal; nrgy contnt incrass by factor 32 for ach full stp on th scal Fixd valu rfrring to th focal nrgy 17

18 Earthquaks / Basic Trms Intnsity Subjctiv masur of th strngth of an arthquak, assssd on th basis of local damag Discrt twlv-gradd Mrcalli scal Dcrass with incrasing focal distanc Epicntr Km IX VIII VII VI 18

19 Earthquak zonation: NE South Amrica Barranquilla # # Mdllín # Cali # Bogotá Earthquak Hazard Zons Zon 0 Zon 1 Zon 2 Zon 3 Zon 4 19

20 World Map of Natural Hazards: Earthquaks Earthquak Hazard Zons Zon 0 Zon 1 Zon 2 Zon 3 Zon 4 20

21 Hazard scondary ffcts Surfac ruptur 21

22 Scondary Effcts Amplification 22

23 Scondary Effcts: liqufaction 23

24 Scondary Effcts landslid 24

25 Scondary Effcts tsunami 25

26 Scondary Effcts fir following 26

27 Scondary ffcts: Microzonation (City Maps) Amplification Liqufaction Landslid Tsunami Fir following 27

28 Vulnrability = Function of Construction typ Hight Vibration charactristics Occupancy typ Construction yar Shap of building Foundation Rlation to adjacnt structurs 28

29 Vulnrability All arthquaks ar charactrizd by th propagation of lastic wavs within th Earth s intrior and along its surfac. As th sismic wavs pass by, an obsrvr on th surfac snss thir propagation as an rratic zig-zag and up-down motion. Blow is an xampl of a rcordd horizontal ground motion tim history. Acclration tim history. Pak Ground Acclration = 0.21 g Vlocity tim history. Pak Ground Vlocity = 29 cm/s Displacmnt tim history. Pak Ground Displacmnt = 8.7 cm 29

30 acclration acc. + displ. displacmnt 30

31 Vulnrability stiff, low-ris structurs intrmdiat, mid-ris flxibl, high-ris structurs Th natural priod of a structur dpnds on its stiffnss. Tallr structurs tnd to b mor flxibl, and thrfor hav longr natural priods than low-ris structurs. Largr arthquaks, softr soils, and longr distancs mov th pak of th rspons spctrum towards longr natural priods. Pak Ground Acclration Effcts of Structural Stiffnss; Rspons Spctrum Building Hight 31

32 32

33 33

34 Vulnrability Construction Yar / Construction Typ 34

35 Soft story collaps at mid-hight 35

36 Vulnrability Shap: symmtry of masss and stiffnss good bad 36

37 Vulnrability Foundation Rlation to Adjacnt structurs 37

38 Loss prvntion Loss prvntion masurs can put to work at th planning, dsign and xcution lvl Land us managmnt Enginring masurs Organizational masurs 38

39 Loss Prvntion Land us managmnt pr-disastr post-disastr Spitak Mxico 39

40 Loss Prvntion... Enginring masurs Antisismic dsign rgulations Quality control Matrial Workmanship Suprvision 40

41 20-60 m Soft Soil Strata <15 m Firm Soil Strata Bdrock Hard Soil or Bdrock 41 TwoBui ldings

42 Loss Prvntion Organizational masurs pr-disastr planning mrgncy plans 42

43 Risk assssmnt: How to quantify th risk? Hazard = occurrnc probability for vnt of a crtain siz Risk = f Vulnrability of buildings, contnts, LoP valus 43

% Major Ki ta Kyushu % Nagasak i % % Fukuo ka H iroshima % Kyoto % K ob % % Osa ka % N agoya % % % Tokyo % A omori Sap poro Th holistic solution for risk assssmnt: Risk modls Hazard information Valu

44 % Major Ki ta Kyushu % Nagasak i % % Fukuo ka H iroshima % Kyoto % K ob % % Osa ka % N agoya % % % Tokyo % A omori Sap poro Th holistic solution for risk assssmnt: Risk modls Hazard information Valu distribution Vulnrability function Citis Industrial Sum Insurd (Earthquak) < 1,000 1,000-3,000 3,000-6,000 6,000-10,000 > 10,000 Mio. Y okohama Kawa sa ki Kilomtrs Scintific input Individual xposur Munich R's loss xprinc St of scnarios Risk curv Expctd loss or loss occurrnc probability Statistics 44

45 Risk modls Loss xcdanc curvs loss 100 mio US-$ 100 yars rturn priod 45

46 Hazard assssmnt Earthquak catalogu f 10 Evnt frquncy M Enrgy attnuation I = C 1 + C 2 M - C 3 log R f Intnsity frquncy Hazard map M M I 46

47 Hazard - arthquak catalogu 47

48 Hazard - picntr map and sourc zons 48

49 Figur R d = 300 km N (pr 100 yars) Instrumntal Historical log N = (M - 5) log N = (M - 5) M Exampl of arthquak rcurrnc analysis (G-R rlation) for sismic activity assssmnt using th ECD mthod: R d = 300 km 49

50 Normalizd Annual Numbr of Earthquaks >= m Truncatd xponntial rcurrnc rlationship, M 0 =4.7 and N(M 0 ) = 21.5 (pr 100 yrs pr 10 5 km 2 ) (Corrctd historical data ) M= Magnitud (M) Mu = 8.5 Mu = 8.2 Mu = 8.0 Mu = 7.9 Mu = 7.8 Mu = infinit Actual data Rturn Priod corrponding to circular sourc ara with R = 550km (yrs) Magnitud ovr-stimatd by linar xtrapolation 50

51 Isosismal lins - intnsity map Bhuj/Gujarat Jan 26,

52 Hazard - attnuation 52

53 Hazard- scondary ffcts amplification 53

54 rturn priods for intnsitis intnsity 11,5 11, ,75 10,5 10, ,75 9,5 9,25 9 8,75 8,5 8,25 8 7,75 7,5 7,25 7 6,75 6,5 6,25 6 5,75 5,5 5, rturn priod 54

55 Vulnrability construction yar and typ 55

56 Vulnrability - loss curvs 56

57 Application to insuranc Avrag annual loss (AAL) => rating sit spcific Probabl maximum loss (PML) => catastroph potntial - rgional scal An adquat pric and PML must rflct Risk location - hazard Typ of risk - vulnrability Insuranc conditions (Claims xprinc) 57

58 Exposur Valu distribution 58

59 Exposur distribution of valus 59

60 Insuranc conditions Slf-participation dductibls coinsuranc limits 60

61 Forms of loss participation (co-insuranc, dductibl, liability limit) Loss ratio (in %) 100 Insurd s shar of loss 40 Loss: 40% Loss: 40% Loss: 40% Insurr s paymnt Loss: 10% Loss: 10% Loss: 10% Co-insuranc 20% (of loss) Dductibl 5% (of TSI) Liability limit 30% (of TSI) 61

62 Exampl for Earthquak Avrag loss = 5% Dductibl = 2% Rduction of indmnity = 25% Avrag loss Earthquak 5% 10% 20% Indmnity rduction (in %) , Dductibl (in % of s.i.) 62

63 63

64 Risk assssmnt is fraught with problms and uncrtaintis, but w try hard... 64

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