Abstract
EARTHQUAKE INSURANCE For an insurer or a reinsurer, one of the major challenges connected with property insurance in earthquake prone countries is to evaluate the Probable Maximum Loss (PML). Why is that so important? The answer to this question is that if the PML assessment is not performed meticulously and correctly, then the insurer may take on greater liability than is reasonable considering the insurance company's existing solvency capital. Under such circumstances, survival of the insurer would be at risk and raises the question as to whether the policyholder would receive contractual compensation or not. Any prudent insurer will do his best to evaluate the PML that he is likely to sustain in the event of a serious earthquake. The insurer must evaluate three main factors: When we at Skandia check our exposure, we...
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