Probabilistic assessment of earthquake insurance rates for buildings - Seismic Risk Analysis and Management of Civil Infrastructure Systems - page 802

damage probability matrices. In this respect it is important that future
insurance risk assessment models should be developed based on an
interaction among actuarial science, earthquake engineering, and earth
sciences.
• Estimation of earthquake damage depends mostly on the observed
damage statistics compiled from past earthquakes. However, the
observed damage data is generally not suffi cient and should be supple-
mented with expert opinion or analytical methods.
• The commercially priced earthquake insurance rates estimated based
on the proposed probabilistic model (per policy basis) are signifi cantly
greater than what are currently charged by TCIP. This is partly attrib-
uted to the fact that, since TCIP, the offi cial regulator of the tariff, is a
nonprofi t organization, the load factor given in Eq. (29.5) can be assumed
as zero, making the commercially priced rates equal to the pure risk
premium rates, decreasing the difference from the currently charged
insurance rates. The remaining difference can partly be explained by the
law of large numbers, which can be stated within this context: as the
number of policies increases the uncertainty in the expected loss of an
insured building stock decreases reducing the insurance rates requested
by the insurer.
• The current deductible rate of 2% in the Turkish earthquake insurance
implementation is much less than what is currently charged in other
countries. At the international level, the deductible rate is in the order
of 10-15%. Considering the fact that small to moderate magnitude
earthquakes occur frequently but result in minor damage, the percent-
age of the deductible might be increased in the tariff specifi ed by TCIP
so that the insurance rates decrease.
• A major portion of the earthquake insurance premium rates results
from the expected annual damage contribution of small and moderate
magnitude earthquakes. Therefore special attention should be paid to
the accurate assessment of the seismic hazard resulting from small and
moderate magnitude earthquakes.
• In calculating the commercially priced earthquake insurance rates, the
value of the load factor should be based on a detailed analysis taking
into consideration the local insurance and the international reinsurance
market conditions.
• Signifi cantly higher (two to three times more) insurance premium rates
that result from the violation of the code requirements strongly suggest
that compliance with the seismic code should be an important factor
when determining the earthquake insurance rates. In other words, sig-
nifi cantly different rates should be charged for buildings depending on
their degree of compliance with the code. It is also believed that enforce-
ment of such a criterion will not only encourage the implementation of