Earthquake Loss Assessment of Xiamen and Earthquake Insurance

Abstract

This chapter, based on the analysis of potential earthquake hazard in Xiamen, gives earthquake loss estimation in contrast with insurance reserve and suggests some countermeasures for insurance companies in Xiamen. Xiamen ’’ is located on the central part of Changle–Shaoan fault zone, eastward facing Taiwan, which is the most active seismic zone in China. In 1604 Quanzhou overseas experienced exterminatory earthquake of Ms 8 and the intensity in Xiamen reached eight, hitting an all time high and resulting in serious building damage, casualties, and property losses. Earthquake insurance plays a significant role in such scenarios to mitigate the losses to a large extent. For the purpose of earthquake insurance, a correct estimation of probable maximum loss in a certain period is necessary. The insurance company must maintain an earthquake insurance fund and increase it at an appropriate speed to ensure the ability to cope with the impact of a tremendous earthquake disaster. theoretically, under normal conditions for an insurance company, maximum indemnity capacity for earthquake losses will be the sum of premium surplus plus general reserve plus capital. If properly handled, earthquake insurance can help alleviate the economic impact of a major earthquake without harming an insurance industry. The chapter suggests that earthquake coverage should be given legal status to be specified in "Earthquake Disaster Law". Only in this way can an earthquake reserve be accumulated on an appropriate scale and at an appropriate speed.