Skip to main content
SpringerLink
Log in

Earthquake loss and Solvency Capital Requirement calculation using a fault-specific catastrophe model

The Geneva Papers on Risk and Insurance - Issues and Practice Aims and scope Submit manuscript

Cite this article

Abstract

As of January 2016, the Solvency II Directive demands that all insurance companies in the EU perform a Solvency Capital Requirement (SCR) calculation. We propose an earthquake catastrophe model that calculates the SCR using an innovative hazard module. We test our model in the Attica region, which hosts 41.6% of the insured buildings in Greece. The results show a risk premium of 1.63% up to 3.16% for residential buildings, depending on exposure and deductible policy. A comparison between the EIOPA’s Standard Formula (SF) and our model shows that the SF overestimates the SCR by 19.3% in the Attica region. The addition of the 2% deductible to the exposure policies results in a 56.8% lower SCR than when using the SF. The overestimation varies from 2.7% to 133.57% in seven out of 10 catastrophe risk evaluation and standardising target accumulations zones, and by 16.28–32.97% in the three remaining zones.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7

References

  • Alm, J. 2015. A simulation model for calculating solvency capital requirements for non-life insurance risk. Scandinavian Actuarial Journal 2: 107–123. https://doi.org/10.1080/03461238.2013.787367.

    Article  Google Scholar 

  • Bermúdez, L., A. Ferri, and M. Guillén. 2013. A correlation sensitivity analysis of non-life underwriting risk in solvency capital requirement estimation. ASTIN Bulletin 43 (1): 21–37. https://doi.org/10.1017/asb.2012.1.

    Article  Google Scholar 

  • Bolt, B.A. 1999. Earthquakes, 366. New York: W.H. Freeman and Company.

    Google Scholar 

  • Boncio, P., G. Lavecchia, and B. Pace. 2004. Defining a model of 3D seismogenic sources for seismic hazard assessment applications: The case of central apennines (Italy). Journal of Seismology 8 (3): 407–425. https://doi.org/10.1023/B:JOSE.0000038449.78801.05.

    Article  Google Scholar 

  • Chandler, A.M., E. John, W. Jones, and M.H. Patel. 2001. Property loss estimation for wind and earthquake perils. Risk Analysis 21 (2): 235–250. https://doi.org/10.1111/0272-4332.212108.

    Article  Google Scholar 

  • Coppersmith, Kevin J., and Robert R. Youngs. 1989. Issues regarding earthquake source characterization and seismic hazard analysis within passive margins and stable continental interiors. In Earthquakes at North-Atlantic passive margins: Neotectonics and postglacial rebound, ed. S.P. Gregersen and W. Basham, 601–631. Dordrecht: NATO ASI series, Kluwer Academic Publishers.

    Chapter  Google Scholar 

  • Crowley, H., and J.J. Bommer. 2006. Modelling seismic hazard in earthquake loss models with spatially distributed exposure. Bulletin of Earthquake Engineering 4 (3): 249–273. https://doi.org/10.1007/s10518-006-9009-y.

    Article  Google Scholar 

  • Cummins, J.D. 2008. CAT bonds and other risk-linked securities: State of the market and recent developments. Risk Management and Insurance Review 11 (1): 23–47. https://doi.org/10.1111/j.1540-6296.2008.00127.x.

    Article  Google Scholar 

  • Degg, M.R. 1992. Geohazards natural and man-made. In Geohazards: Natural and man-made, ed. G.J.H. McCall, D.J.C. Laming, and S.C. Scott, 93–104. London: Chapman & Hall.

    Google Scholar 

  • Deligiannakis, G., I.D. Papanikolaou, and G. Roberts. 2018. Fault specific GIS based seismic hazard maps for the Attica Region, Greece. Geomorphology 306: 264–282. https://doi.org/10.1016/j.geomorph.2016.12.005.

    Article  Google Scholar 

  • Doff, R. 2008. A critical analysis of the solvency II proposals. The Geneva Papers on Risk and Insurance—Issues and Practice 33 (2): 193–206. https://doi.org/10.1057/gpp.2008.2.

    Article  Google Scholar 

  • EAEE (Hellenic Association of Insurance Companies). 2019. Natural catastrophes in Greece 1993–2018. Athens.

  • EIOPA. 2014a. Annexes to the technical specification for preparatory phase (part I). Brussells: EIOPA.

    Google Scholar 

  • EIOPA. 2014b. The underlying assumptions in the standard formula for the solvency capital requirement calculation. Brussels: EIOPA.

    Google Scholar 

  • EIOPA. 2018. EIOPA’s second set of advice to the european commission on specific items in the solvency II delegated regulation (EIOPA-BoS-18/075). February.

  • ELSTAT. 2015. Buildings inventory 2011. Athens: Greece.

    Google Scholar 

  • European Union. 2009. Solvency II directive. Official Journal of the European Union, vol. 52. Strasbourg: European Union.

    Google Scholar 

  • Faure Walker, J.P., F. Visini, G. Roberts, C. Galasso, K. McCaffrey, and Z. Mildon. 2019. Variable fault geometry suggests detailed fault-slip-rate profiles and geometries are needed for fault-based probabilistic seismic hazard assessment (PSHA). BSSA 109: 110–123.

    Google Scholar 

  • Florez, M.A., and G.A. Prieto. 2017. Precise relative earthquake depth determination using array processing techniques. Journal of Geophysical Research: Solid Earth 122 (6): 4559–4571. https://doi.org/10.1002/2017JB014132.

    Article  Google Scholar 

  • Gatzert, N., and M. Martin. 2012. Quantifying credit and market risk under solvency II: Standard approach versus internal model. Insurance: Mathematics and Economics 51 (3): 649–666. https://doi.org/10.1016/j.insmatheco.2012.09.002.

    Article  Google Scholar 

  • Goda, K., and H.P. Hong. 2010. Insurer’s solvency under catastrophic seismic risk. Safety, Reliability and Risk of Structures, Infrastrcutures and Engineering Systems. 3439–3446.

  • Grossi, P., H. Kunreuther, and D. Windeler. 2005. An introduction to catastrophe models and insurance. In Catastrophe modeling: A new approach to managing risk, ed. Chandu C. Patel. Dordrecht: Kluwer Academic Publisher. https://doi.org/10.1007/b100669.

    Chapter  Google Scholar 

  • Hofer, L., M.A. Zanini, and P. Gardoni. 2020. Risk-based catastrophe bond design for a spatially distributed portfolio. Structural Safety 83: 101908. https://doi.org/10.1016/j.strusafe.2019.101908.

    Article  Google Scholar 

  • Kaas, R., M. Goovaerts, J. Dhaene, and M. Denuit. 2008. Modern actuarial risk theory, 2nd ed. Berlin: Springer. https://doi.org/10.1017/CBO9781107415324.004.

    Book  Google Scholar 

  • Kappos, A.J., and G. Panagopoulos. 2010. Fragility curves for reinforced concrete buildings in Greece. Structure and Infrastructure Engineering 6 (1–2): 39–53. https://doi.org/10.1080/15732470802663771.

    Article  Google Scholar 

  • Kappos, A.J., V. Lekidis, G. Panagopoulos, I. Sous, N. Theodulidis, Ch. Karakostas, T. Anastasiadis, T. Salonikios, and B. Margaris. 2007. Analytical estimation of economic loss for buildings in the area struck by the 1999 athens earthquake and comparison with statistical repair costs. Earthquake Spectra 23 (2): 333–355. https://doi.org/10.1193/1.2720366.

    Article  Google Scholar 

  • Kappos, A.J., K. Pitilakis, K. Morfidis, and N. Hatzinikolaou. 2002. Vulnerability and risk study of volos (Greece) Metropolitan Area. In 12th European Conference on Earthquake Engineering. September.

  • Kappos, A.J., G. Panagopoulos, C. Panagiotopoulos, and G. Penelis. 2006. A hybrid method for the vulnerability assessment of R/C and URM buildings. Bulletin of Earthquake Engineering 4 (4): 391–413. https://doi.org/10.1007/s10518-006-9023-0.

    Article  Google Scholar 

  • Kappos, A.J., G. Panagopoulos, and G.G. Penelis. 2008. Development of a seismic damage and loss scenario for contemporary and historical buildings in Thessaloniki, Greece. Soil Dynamics and Earthquake Engineering 28 (10–11): 836–850. https://doi.org/10.1016/j.soildyn.2007.10.017.

    Article  Google Scholar 

  • Kappos, A.J., K.C. Stylianidis, and K. Pitilakis. 1998. Development of seismic risk scenarios based on a hybrid method of vulnerability assessment. Natural Hazards 17 (2): 177–192. https://doi.org/10.1023/A:1008083021022.

    Article  Google Scholar 

  • Kappos, A.J., K.C. Stylianidis, A.G. Sextos, L. Papaikolaou, V.K., Panagopoulos, G., Koyris, and E. Goutzika. 2009. Seismic risk scenarios for the building stock in Grevena. In 16th Hellenic Conference on Concrete. Paphos, Cyprus.

  • Lagomarsino, S., and S. Giovinazzi. 2006. Macroseismic and mechanical models for the vulnerability and damage assessment of current buildings. Bulletin of Earthquake Engineering 4 (4): 415–443. https://doi.org/10.1007/s10518-006-9024-z.

    Article  Google Scholar 

  • Lallemant, D., and Anne Kiremidjian. 2015. A beta distribution model for characterizing earthquake damage state distribution. Earthquake Spectra 31 (3): 1337–1352. https://doi.org/10.1193/012413EQS013M.

    Article  Google Scholar 

  • Marinos, P., G. Boukovalas, N.G. TsiambaosProtonotarios, and G. Sabatakakis. 1999. Preliminary geological—geotechnical study of the disaster area (of Athens Earthquake of Sept 7th, 1999) in NW Athens Basin (in Greek). Athens: Greece.

    Google Scholar 

  • Martins, L., V. Silva, M. Marques, H. Crowley, and R. Delgado. 2014. Evaluation of analytical fragility and damage-to- loss models for reinforced concrete buildings. In Second European Conference on Earthquake Engineering and Seismology, Istanbul, 3–4. https://doi.org/10.13140/2.1.3001.9842.

  • Michetti, A.M., F.A. Audemard, and M. Shmuel. 2005. Future trends in paleoseismology: Integrated study of the seismic landscape as a vital tool in seismic hazard analyses. Tectonophysics 408 (1–4): 3–21. https://doi.org/10.1016/j.tecto.2005.05.035.

    Article  Google Scholar 

  • Mitchell-Wallace, K., M. Jones, J. Hillier, and M. Foote. 2017. Natural catastrssophe risk management and modelling, natural catastrophe risk management and modelling, 1st ed. Hoboken: Wiley. https://doi.org/10.1002/9781118906057.

    Book  Google Scholar 

  • Mittnik, S. 2011. Solvency II calibrations: Where curiosity meets spuriosity. Munich: Center for Quantitative Risk Analysis (CEQURA).

    Google Scholar 

  • Munich Re Group. 2019. NatCatSERVICE relevant natural loss events wordlwide 2007–2017. Munich Re. 2019. http://natcatservice.munichre.com/topten/1?filter=eyJ5ZWFyRnJvbSI6MTk4MCwieWVhclRvIjoyMDE2fQ%3D%3D&type=1.

  • Pace, B., L. Peruzza, and F. Visini. 2010. LASSCI2009.2: Layered earthquake rupture forecast model for Central Italy, Submitted to the CSEP Project. Annals of Geophysics 53 (3): 85–97. https://doi.org/10.4401/ag-4847.

    Article  Google Scholar 

  • Papanikolaou, I.D. 2003. Generation of high resolution seismic hazard maps through integration of earthquake geology, fault mechanics theory and GIS techniques in extensional tectonic settings. PhD Thesis, University of London.

  • Papanikolaou, Ioannis D. 2011. Uncertainty in intensity assignment and attenuation relationships: How Seismic hazard maps can benefit from the implementation of the environmental seismic intensity scale (ESI 2007). Quaternary International 242 (1): 42–51. https://doi.org/10.1016/j.quaint.2011.03.058.

    Article  Google Scholar 

  • Papanikolaou, I.D., G.P. Roberts, G. Deligiannakis, A. Sakellariou, and E. Vassilakis. 2013. The sparta fault, Southern Greece: From segmentation and tectonic geomorphology to seismic hazard mapping and time dependent probabilities. Tectonophysics 597–598: 85–105. https://doi.org/10.1016/j.tecto.2012.08.031.

    Article  Google Scholar 

  • Papanikolaou, Ioannis D., R. Van Balen, P.G. Silva, and K. Reicherter. 2015. Geomorphology of active faulting and seismic hazard assessment: New tools and future challenges. Geomorphology 237: 1–13. https://doi.org/10.1016/j.geomorph.2015.02.024.

    Article  Google Scholar 

  • Papazachos, B.C., P.E. Comninakis, G.F. Karakaisis, B.G. Karakostas, C.A. Papaioannou, C.B. Papazachos, and E.M. Scordilis. 2000. A Catalogue of earthquakes in Greece and surrounding area for the period 550BC-1999. Thessaloniki.

  • Papazachos, B.C., and C. Papazachou. 2003. The earthquakes of Greece. Thessaloniki: Ziti Publications.

    Google Scholar 

  • Petseti, A., and M. Nektarios. 2012. Proposal for a national earthquake insurance programme for greece. The Geneva Papers on Risk and Insurance—Issues and Practice 37 (2): 377–400. https://doi.org/10.1057/gpp.2012.12.

    Article  Google Scholar 

  • Pomonis, A., M. Gaspari, and F.S. Karababa. 2014. Seismic vulnerability assessment for buildings in greece based on observed damage data sets. Bollettino Di Geofisica Teorica Ed Applicata 55 (2): 501–534. https://doi.org/10.4430/bgta0069.

    Article  Google Scholar 

  • PreventionWeb. 2020. Greece—Disaster & Risk Profile. 2020. https://www.preventionweb.net/countries/grc/data/.

  • Reiter, L. 1990. Earthquake hazard analysis. Issues and insights, 1st ed. New York: Columbia University Press. https://doi.org/10.1002/eqe.4290201211.

    Book  Google Scholar 

  • Roberts, G.P., P. Cowie, I. Papanikolaou, and A.M. Michetti. 2004. Fault scaling relationships, deformation rates and seismic hazards: An example from the Lazio-Abruzzo Apennines, Central Italy. Journal of Structural Geology 26 (2): 377–398. https://doi.org/10.1016/S0191-8141(03)00104-4.

    Article  Google Scholar 

  • Sauter, F., and H.C. Shah. 1978. Studies on earthquake insurance. In Proceedings of the Central American Conference on Earthquake Engineering. San Salvador.

  • Scholz, C.H. 2019. The Mechanics of Earthquakes and Faulting, 3rd ed. Cambridge: Cambridge University Press. https://doi.org/10.1017/9781316681473.

    Book  Google Scholar 

  • Schwartz, D.P., and K.J. Coppersmith. 1986. Seismic hazards: new trends in analysis using geologic data. In Active tectonics: Impact on society (1986), 215–30. Washington: The National Academies Press. https://doi.org/10.17226/624.

  • Shearer, P.M., and P.B. Stark. 2012. Global risk of big earthquakes has not recently increased. Proceedings of the National Academy of Sciences of the United States of America 109 (3): 717–721. https://doi.org/10.1073/pnas.1118525109.

    Article  Google Scholar 

  • Stein, S., R.J. Geller, and M. Liu. 2012. Why earthquake hazard maps often fail and what to do about it. Tectonophysics 562–563: 1–25. https://doi.org/10.1016/j.tecto.2012.06.047.

    Article  Google Scholar 

  • Swiss Re Institute. 2019. Natural catastrophes and man-made disasters in 2018: Secondary’ perils on the frontline. Sigma No. 2.

    Google Scholar 

  • Theodulidis, N. 1991. Contribution to strong ground motion study in Greece. PhD Thesis (in Greek), Aristotle University of Thessaloniki, Greece.

  • Theodulidis, N.P., and B.C. Papazachos. 1992. Dependence of strong ground motion on magnitude-distance, site geology and macroseismic intensity for shallow earthquakes in Greece: I, peak horizontal acceleration, velocity and displacement. Soil Dynamics and Earthquake Engineering 11 (7): 387–402. https://doi.org/10.1016/0267-7261(92)90003-V.

    Article  Google Scholar 

  • Weinkle, Jessica. 2015. A public policy evaluation of Florida’s citizens property insurance corporation. Journal of Insurance Regulation 34 (2015): 31–62.

    Google Scholar 

  • Wells, D.L., and K.J. Coppersmith. 1994. New empirical relationships among magnitude, rupture length, rupture width, rupture area, and surface displacement. Bulletin—Seismological Society of America 84 (4): 974–1002.

    Google Scholar 

  • Woessner, J., D. Laurentiu, D. Giardini, H. Crowley, F. Cotton, G. Grünthal, G. Valensise, et al. 2015. The 2013 European seismic hazard model: Key components and results. Bulletin of Earthquake Engineering 13 (12): 3553–3596. https://doi.org/10.1007/s10518-015-9795-1.

    Article  Google Scholar 

  • Yeats, S., and S. Prentice. 1996. Introduction to special section. Paleoseismology Corvallis A Proverb States 101: 5847–5853.

    Google Scholar 

  • Zimbidis, A.A., N.E. Frangos, and A.A. Pantelous. 2007. Modeling earthquake risk via extreme value theory and pricing the respective catastrophe bonds. ASTIN Bulletin 37 (01): 163–183. https://doi.org/10.2143/ast.37.1.2020804.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Mineralogy-Geology Laboratory, Department of Natural Resources Development and Agricultural Engineering, Agricultural University of Athens, 75 Iera Odos, 118-55, Athens, Greece

    Georgios Deligiannakis & Ioannis Papanikolaou

  2. Department of Statistics, Athens University of Economics and Business, Athens, Greece

    Alexandros Zimbidis

Authors
  1. Georgios Deligiannakis
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Alexandros Zimbidis
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ioannis Papanikolaou
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Georgios Deligiannakis.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and Permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Deligiannakis, G., Zimbidis, A. & Papanikolaou, I. Earthquake loss and Solvency Capital Requirement calculation using a fault-specific catastrophe model. Geneva Pap Risk Insur Issues Pract 48, 821–846 (2023). https://doi.org/10.1057/s41288-021-00259-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41288-021-00259-x

Keywords

search

Navigation