Research Information System
Springer, London/Berlin , Zug, 2021
Earthquake disasters present a wide range of physical and socio-economic impacts,
with potentially long-lasting effects. These impacts include cascading effects such
as business interruption and revenue loss that may lead to financial challenges.
Earthquake insurance, where the risks are essentially transferred to international
markets, constitute one of the important financial strategies aimed at funding the
rapid response, recovery and post-earthquake reconstruction. Earthquake insurance
penetration around the globe varies with the risk awareness in the region and also by
its affordability. In this connection a rational, risk-based assessment of the pricing of
the earthquake insurance has gained importance in recent years. As a result of these
risk-based pricing, however, larger rating differentials can enter the market that may
need to be smoothed by the insurance sector.
The main tool in the risk-based insurance pricing is the catastrophe (CAT) risk
modelling where earthquake events are simulated relying on vulnerability criteria to
compute a rational and fair price for the loss to a client’s portfolio. The main output of
CAT models is traditionally the probability distribution of estimated seismic loss (i.e.
EP curve) for a given portfolio. The EP curve constitutes the essential ingredient of
earthquake insurance pricing and reinsurance needs assessment process. Although,
over the last decades, earthquake CAT modeling has been dominated by commercial
vendors, today several local and international scale earthquake risk models are in
existence or under development. It is believed that, these new CAT models promise
greater transparency.
One of the important issues and challenges in earthquake insurance is the quantification of losses in a rational, fair and expedient manner. Right after an earthquake,
it is very important to evaluate the damage level of the buildings in the affected area
to assess the financial losses as well as its re-usability and reparability. This process
requires an able CAT management, a qualified team of experts in adequate numbers,
supported by a rational loss assessment methodology.
For the betterment of the earthquake insurance penetration rate, obligatory insurance can certainly provide a working solution. A number of earthquake pools exist
around the world. New Zealand’s Earthquake Commission (EQC) and the Turkish
Catastrophe Insurance Pool (TCIP) are the two of the oldest and most successful
earthquake pools existing. TCIP was established in 2000, after the 1999 Kocaeli earthquake, as a compulsory homeowners’ pool to reduce catastrophe earthquake
exposure to the government. The owners of residential properties within municipality boundaries are obliged (through administrative measures) to buy earthquake
insurance policy for their homes. The penetration ratio of Compulsory Earthquake
(EQ) Insurance Policy for Turkey is 56% as of October 2020. The premium rates
range from 0.33% (per mill) to 4.14%, depending on structural type, height as of
number of floors, and the locality of the building. The maximum insured limit for
a single apartment is 240.000-TL and the deductible is 2% of the insured value.
Currently, the pool has not enough financial resources for a big EQ in Marmara
region, she cedes a large amount of its risks to international reinsurers, which is
about 34 billion-TL for 2020–2021 period. Both the TCIP and the Union of Insurance and Reinsurance Companies of Turkey have worked with academia to develop
CAT risk models and risk-based pricing for the obligatory and facultative commercial earthquake insurance. In connection with the equitable and timely assessment
and payment of post-earthquake losses, TCIP has also developed a new loss assessment methodology which can also be re-purposed to develop pre-earthquake risk
assessment and retrofit strategies.
On November 4–5, 2019 in ˙Istanbul, Turkey, the TCIP has organized the International Workshop on Advances in Assessment and Modeling of Earthquake Loss to
share recent advances in the loss assessment and modelling of earthquake risk (https://
www.tcip-workshops.com/calistay-hakkinda). The workshop was well attended by
CAT modeling companies, international insurance/reinsurance companies, state
insurance policy makers and the academia.
This book is the byproduct of the aforementioned TCIP international workshop
that provided an opportunity to present state-of-the-art discussions on the issues
relevant to the earthquake insurance. The papers presented in the workshop and
additionally included ones are grouped under three coherent parts that are explained
in the following.
The first part encompasses papers on post-earthquake damage assessment.
S. Pampanin introduces a simplified procedure for post-earthquake safety and loss
assessment of buildings. In the next three chapters, K. Kusunoki reviews the damage
assessment techniques in Japan; R. E. Gonzales et al. discuss the post-earthquake
demolition process in Christchurch, New Zealand and; M. Di Ludovico et al. treat
the damage assessment in Italy as well as the recent experiences on reparability
and repair costs. The last paper in the first part, by A. Ilki et al., elaborates on the
post-earthquake damage assessment methodology of the TCIP.
In the second part, earthquake loss modeling and insurance pricing are covered.
M. Erdik discusses the issues on earthquake risk assessment from insurance
perspective. H. Crowley introduces the SERA Project and elaborates on the European earthquake risk models. P. J. Stafford reviews risk-oriented earthquake hazard
assessment. The seismic fragility and vulnerability of buildings are discussed by
L. Di-Sarno and A. El-Nashai. S. Akkar treats on the earthquake loss assessment
models and provides a case study on the content loss modeling conditioned on
building damage. Finally, M. Kohrangi et al. review earthquake CAT risk modeling
with applications to insurance industry. In the third part, earthquake insurance for resilience and post-earthquake fire are
discussed.
F. Bendimerad discusses the role of earthquake insurance in risk reduction and
building resilience with specific examples from TCIP. C. Scawthorn reviews the fire
following earthquake and the related potential in Istanbul.
These up-to-date authorative papers by the experts are expected to make this book
a guide book for the researchers and practitioners in the related fields. We, as the
editors of this book, are thankful to all the contributors for their fruitful cooperation.
We are also very much indebted to the TCIP administration, for their support and
encouragement in realizing this book and the associated International Workshop on
Advances in Assessment and Modeling of Earthquake Loss.