The role of reinsurance in earthquake risk assessment

Abstract

This paper deals with the assessment of catastrophe perils from a reinsurance point of view. Taking earthquake as an example, we try to answer two crucial questions

- What are the factors that most influence the premium?

- How can we arrive at (maximum) event losses?

In a first paragraph, we try to define catastrophe losses in contrast to single risk losses. Then we discuss in some detail the elements that have the largest impact on catastrophe losses: size and frequency of earthquake events, vulnerability of the insured interests exposed and the conditions of the earthquake endorsement.

New Zealand is taken as an example to show how risk premiums can be calculated and how we can arrive at maximum probable/possible losses with a certain occurrence probability.

Finally, based on the questions we want to answer, the basic information needs in the entrepreneurial reinsurance environment are touched upon. The paper is intended as an introduction to the verbal presentation and the following discussion.