Evaluating the Effect of Seismic Hazard Level on the Risk-based Insurance Premium of Buildings against Earthquake
Subject Areas : Analysis of Structure and EarthquakeShahrokh Tafi 1 , پوریا رشوند 2 , Mehdi Mahdavi Adeli 3 , سید امیرحسین هاشمی 4
1 - Department of Civil Engineering, Qazvin Branch, Islamic Azad University, Qazvin, Iran
2 -
3 - Department of Civil Engineering, West Tehran Branch, Islamic Azad University, Tehran, Iran
4 -
Keywords: Earthquake, Insurance of Buildings against Earthquake, Risk-based Insurance, Seismic Hazard Rate, Peak Ground Acceleration ,
Abstract :
The abundant uncertainties in earthquakes and the resulting damages to buildings make determining the insurance premium of buildings for earthquake coverage one of the most challenging types of insurance. This determination is subject to various variables such as earthquake hazard, which is often overlooked. The current study aims to evaluate the effect of seismic hazard levels on the risk-based insurance premiums for buildings against earthquakes. To achieve this, a risk-based framework is established to calculate earthquake insurance premiums, incorporating seismic hazard curves and fragility curves as the main components. By defining the seismicity model for Tehran city, combining faults and earthquakes, and conducting a probabilistic seismic hazard analysis, seismic hazard curves were determined at three risk levels: low, medium and high. To determine fragility curves at four performance levels, five target buildings subjected to 120 accelerograms were analyzed through incremental dynamic analysis. The desired curves were determined by regressing a normal distribution, resulting in the calculation of 15 earthquake insurance premiums. The results of this study show that the change in earthquake hazard level from low to medium and from medium to high (with a 50% and 40% increase in peak ground acceleration, respectively) leads to 120% and 85% increase in earthquake insurance premium. In general, the study suggests that as the earthquake hazard level increases in terms of peak ground acceleration, the earthquake insurance risk increases significantly, by 2.2 times. This indicates that guidelines proposing earthquake insurance premiums independent of seismic risk may lead to highly erroneous calculations.
[1] Cummins JD, Harrington SE, editors. Fair rate of return in property-liability insurance. Springer Science & Business Media; 2013 Mar 9.
[2] Bradley BA. A critical examination of seismic response uncertainty analysis in earthquake engineering. Earthquake engineering & structural dynamics. 2013 Sep; 42(11):1717-29.
[3] Pakdel-Lahiji N, Hochrainer-Stigler S, Ghafory-Ashtiany M, Sadeghi M. Consequences of financial vulnerability and insurance loading for the affordability of earthquake insurance systems: evidence from Iran. The Geneva Papers on Risk and Insurance-Issues and Practice. 2015 Apr 1; 40:295-315.
[4] Lin X. Risk awareness and adverse selection in catastrophe insurance: Evidence from California’s residential earthquake insurance market. Journal of Risk and Uncertainty. 2020 Aug;61(1):43-65.
[5] French SP, Rudholm GG. Damage to public property in the Whittier Narrows earthquake: Implications for earthquake insurance. Earthquake spectra. 1990 Feb; 6(1):105-23.
[6] Brillinger DR. Earthquake risk and insurance. Environmetrics. 1993 Mar;4(1):1-21.
[7] Kagan YY. Earthquake size distribution and earthquake insurance. Communications in statistics. Stochastic models. 1997 Jan 1; 13(4):775-97.
[8] Shephard, R. B., Smith, E. G. C., & Spurr, D. D. (1997). Earthquake insurance loss assessments for regions of Australia. Bulletin of the New Zealand Society for Earthquake Engineering, 30(1), 32-39.
[9] Shephard RB, Spurr DD, Walker GR. The Earthquake Commission’s earthquake insurance loss model. InProceedings, 2002 Annual Conference of the New Zealand Society for Earthquake Engineering 2002.
[10] Yucemen, M. S. (2005). Probabilistic assessment of earthquake insurance rates for Turkey. Natural Hazards, 35, 291-313.
[11] Yucemen M. Probabilistic Assessment of Earthquake Insurance Premium Rates For Jordan. InProc. The International Earthquake Engineering Conference 2005 Nov (pp. 21-24).
[12] Liu RS, Wang Z, Zhu M. Study on financial loss and its adjustment in earthquake insurance. Acta Seismologica Sinica. 2006 Mar; 19:207-16.
[13] Walker GR. Earthquake insurance: an Australian perspective. Australian Journal of Structural Engineering. 2008 Jan 1;8(1):39-48.
[14] Yucemen MS, Yilmaz C, Erdik MU. Probabilistic assessment of earthquake insurance rates for important structures: application to Gumusova–Gerede motorway. Structural Safety. 2008 Sep 1; 30(5):420-35.
[15] Wang Z, Lin T, Walker G. Earthquake Risk and Earthquake Catastrophe Insurance for the People's Republic of China.
[16] Athavale M, Avila SM. An analysis of the demand for earthquake insurance. Risk Management and Insurance Review. 2011 Sep; 14(2):233-46.
[17] Petseti A, Nektarios M. Proposal for a national earthquake insurance programme for Greece. The Geneva Papers on Risk and Insurance-Issues and Practice. 2012 Apr 1; 37:377-400.
[18] Charleson AW, Allaf NJ. Costs of base-isolation and earthquake insurance in New Zealand. In Proceedings of the 2012 New Zealand Society of Earthquake Engineering (NZSEE) Conference, Christchurch, New Zealand 2012 Apr (pp. 13-15).
[19] Tian L, Yao P, Jiang SJ. Perception of earthquake risk: a study of the earthquake insurance pilot area in China. Natural hazards. 2014 Dec; 74:1595-611.
[20] Marulanda MC, Cardona OD, Mora MG, Barbat AH. Design and implementation of a voluntary collective earthquake insurance policy to cover low-income homeowners in a developing country. Natural Hazards. 2014 Dec; 74:2071-88.
[21] Tian L, Yao P. Preferences for earthquake insurance in rural China: factors influencing individuals’ willingness to pay. Natural Hazards. 2015 Oct; 79:93-110.
[22] Lin JH. Earthquake insurance pricing: a risk‐based approach. Disasters. 2018 Apr;42(2):392-404.
[23] Nguyen C, Noy I. Insuring earthquakes: how would the Californian and Japanese insurance programs have fared after the 2011 New Zealand earthquake? Disasters. 2019.
[24] Pothon A, Gueguen P, Buisine S, Bard PY. California earthquake insurance unpopularity: the issue is the price, not the risk perception. Natural Hazards and Earth System Sciences. 2019 Aug 29; 19(8):1909-24.
[25] Pothon A, Buisine S, Gueguen P, Bard PY. A maturity scale for earthquake insurance development based on the California experience. In Earthquake Geotechnical Engineering for Protection and Development of Environment and Constructions 2019 Oct 22 (pp. 4548-4555). CRC Press.
[26] Goda K, Wilhelm K, Ren J. Relationships between earthquake insurance take-up rates and seismic risk indicators for Canadian households. International journal of disaster risk reduction. 2020 Nov 1; 50:101754.
[27] Gkimprixis A, Douglas J, Tubaldi E. Seismic risk management through insurance and its sensitivity to uncertainty in the hazard model. Natural hazards. 2021 Sep; 108(2):1629-57.
[28] Ardiansyah A, Gunawan SL, Pramujati WH, Putri ER, Oktaviana PP, Nurcahyo CB. An earthquake insurance for residential and non-engineered masonry building in Surabaya City. InIOP Conference Series: Earth and Environmental Science 2022 Apr 1 (Vol. 1015, No. 1, p. 012010). IOP Publishing.
[29] Radu N, Alexandru F. Parametric insurance—A possible and necessary solution to insure the earthquake risk of Romania. Risks. 2022 Mar 8; 10(3):59.
[30] Pai J, Li Y, Yang A, Li C. Earthquake parametric insurance with Bayesian spatial quantile regression. Insurance: Mathematics and Economics. 2022 Sep 1; 106:1-2.
[31] Medina RA, Krawinkler H. Evaluation of drift demands for the seismic performance assessment of frames. Journal of Structural Engineering. 2005 Jul; 131(7):1003-13.
[32] Ibarra LF, Medina RA, Krawinkler H. Hysteretic models that incorporate strength and stiffness deterioration. Earthquake engineering & structural dynamics. 2005 Oct; 34(12):1489-511.
[33] McKenna F. OpenSees: a framework for earthquake engineering simulation. Computing in Science & Engineering. 2011 Jun 27; 13(4):58-66.
[34] Amiri GG, Motamed R, Es-Haghi HR. Seismic hazard assessment of metropolitan Tehran, Iran. journal of Earthquake Engineering. 2003 Jul;7(03):347-72.
[35] McGuire RK. Probabilistic seismic hazard analysis: Early history. Earthquake Engineering & Structural Dynamics. 2008 Mar; 37(3):329-38.
[36] Cornell CA. Engineering seismic risk analysis. Bulletin of the seismological society of America. 1968 Oct 1; 58(5):1583-606.
[37] Baker JW. An introduction to probabilistic seismic hazard analysis. White paper version. 2013;2(1):79.
[38] Ramazi H, Firoozi A, Aenollah. Seismotectonics and seismicity of the Silakhor region, Iran. Journal of the Geological Society of India. 2013 Sep 1; 82(3):283-9.
[39] Zare M, Sabzali S. Spectral attenuation of strong motions in Iran. InProceedings of the third international symposium of the effects of surface geology on seismic motion, Grenoble, France, Paper 2006 Aug (No. 146).
[40] Zare M. Seismic hazard zoning in Iran: a state-of-the-art on the studies during four decades. Journal of Seismology and Earthquake Engineering. 2017 Apr 1;19(2):71.
[41] Rajkumari S, Thakkar K, Goyal H. Fragility analysis of structures subjected to seismic excitation: A state-of-the-art review. InStructures 2022 Jun 1 (Vol. 40, pp. 303-316). Elsevier.
[42] Jalayer F, Ebrahimian H, Miano A, Manfredi G, Sezen H. Analytical fragility assessment using unscaled ground motion records. Earthquake Engineering & Structural Dynamics. 2017 Dec; 46(15):2639-63.
[43] Ancheta TD, Darragh RB, Stewart JP, Seyhan E, Silva WJ, Chiou BS, Wooddell KE, Graves RW, Kottke AR, Boore DM, Kishida T. NGA-West2 database. Earthquake Spectra. 2014 Aug; 30(3):989-1005.
[44] Tafi S, Rashvand P, Adeli MM, Hashemi SA. Analyzing the dependency of earthquake insurance premium on the intensity measure used in probabilistic seismic hazard analysis and fragility curves. Ain Shams Engineering Journal. 2024 Aug 3:102989.
[45] Vamvatsikos D, Cornell CA. Applied incremental dynamic analysis. Earthquake spectra. 2004 May;20(2):523-53.
[46] Brunesi E, Nascimbene R, Parisi F, Augenti N. Progressive collapse fragility of reinforced concrete framed structures through incremental dynamic analysis. Engineering Structures. 2015 Dec 1;104:65-79.