The Impact of Portfolio Location Uncertainty on Probabilistic Seismic Risk Analysis

Risk Analysis : an Official Publication of the Society for Risk Analysis
Christoph Scheingraber, Martin A Käser

Abstract

Probabilistic seismic risk analysis is a well-established method in the insurance industry for modeling portfolio losses from earthquake events. In this context, precise exposure locations are often unknown. However, so far, location uncertainty has not been in the focus of a large amount of research. In this article, we propose a novel framework for treatment of location uncertainty. As a case study, a large number of synthetic portfolios resembling typical real-world cases were created. We investigate the effect of portfolio characteristics such as value distribution, portfolio size, or proportion of risk items with unknown coordinates on the variability of loss frequency estimations. The results indicate that due to loss aggregation effects and spatial hazard variability, location uncertainty in isolation and in conjunction with ground motion uncertainty can induce significant variability to probabilistic loss results, especially for portfolios with a small number of risks. After quantifying its effect, we conclude that location uncertainty should not be neglected when assessing probabilistic seismic risk, but should be treated stochastically and the resulting variability should be visualized and interpreted carefully.

References

Jan 9, 2010·Risk Analysis : an Official Publication of the Society for Risk Analysis·Solomon TesfamariamHomayoun Najjaran
Apr 12, 2012·Risk Analysis : an Official Publication of the Society for Risk Analysis·Louis Anthony Cox
Feb 19, 2013·PloS One·Andrea E GaughanAndrew J Tatem
Nov 20, 2016·Risk Analysis : an Official Publication of the Society for Risk Analysis·Eric R StoneJacqueline MacDonald Gibson
Oct 13, 2017·Risk Analysis : an Official Publication of the Society for Risk Analysis·Roxane Foulser-PiggottMartin Hughes

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Citations

Jul 11, 2019·Risk Analysis : an Official Publication of the Society for Risk Analysis·Jean Baptiste NsengiyumvaValentine Mukanyandwi
Sep 17, 2020·Risk Analysis : an Official Publication of the Society for Risk Analysis·Katsuichiro GodaSolomon Tesfamariam

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