Probabilistic assessment of earthquake insurance rates for buildings - Seismic Risk Analysis and Management of Civil Infrastructure Systems - page 796

insurance rates are 5.25‰ for California, 4.30‰ for Japan and 7.27‰ for
Mexico (Deniz, 2006). For other countries, the maximum earthquake insur-
ance premium rates are signifi cantly smaller. However, a typical deductible
rate of 10-15% is applied in most of the countries. This rate is 2% in Turkey.
If a deductible rate of 10% is applied in Turkey, the EADR k of intensity VI
earthquakes (in all seismic zones) and the EADR k of intensity VII earth-
quakes in seismic zones I and II will no longer contribute to the insurance
premium rates (see Table 29.5). The contribution of only the intensity VI
earthquakes to the expected annual damage ratios is 47%, 31%, 29%, 42%,
and 64% for seismic zones from I to V, respectively (see Table 29.5). By
disregarding this contribution, the earthquake insurance rates will be
decreased to the similar level of the ones implemented in other countries.
In the calculation of the commercially priced earthquake insurance rates,
PRP k s, are increased by a factor of 1.67 as has been done in the previous
earthquake insurance studies in Turkey. However, it is emphasized that the
surcharge (load factor) applied by an insurance company is a function of
its capital as well as reinsurance rates which are generally controlled by the
foreign reinsurance fi rms and market conditions. Reduction of this factor
will also result in a decrease in the commercially priced earthquake insur-
ance premium rates obtained in this study. As a matter of fact since TCIP
is a nonprofi t organization the actual increase in PRPs will be marginal and
will be much less than 67%.
29.4 Implementation of earthquake insurance: Turkish
Catastrophe Insurance Pool (TCIP)
Within the context of this chapter it is aimed to give an idea about the
practical implementation of earthquake insurance. In this respect, here we
present an overview of the compulsory earthquake insurance scheme and
describe the organizational structure and operational details of TCIP. It is
also aimed here to share the 12 years of experience with respect to the
implementation of the obligatory earthquake insurance in Turkey, which
may form a good reference for other countries that are planning to set up
such an insurance scheme.
29.4.1 Background information
TCIP is a nonprofi t public entity affi liated with the Ministry of State, to
whom the Under-secretariat of Treasury reports. TCIP was established by
the Decree Law 587 (Date: 27 December 1999) pertaining to the compul-
sory earthquake insurance (Akin, 2008). According to the decree law, earth-
quake insurance was made compulsory for all registered residential
buildings within the municipality boundaries.