The Treatment of Earthquake Portfolio Uncertainty: A Focus on Issues of Asset Distribution

Abstract

In estimating the earthquake loss at a given site, procedures have been developed by earthquake engineers for treating the uncertainty arising from lack of knowledge and intrinsic stochastic variability in the local seismic hazard, and in the vulnerability of the property occupying the site. However, in estimating the earthquake loss, not just for a single site, but for a town or county, or for a group of regionally dispersed properties, or for a collection of mobile or portable assets, the treatment of portfolio uncertainty presents an additional statistical challenge to current methodology and practice. Spatial statistical methods are here applied to address portfolio uncertainty; an issue which is particularly important for insurance catastrophe management.