Abstract
We present an overview of Japan’s earthquake insurance system for the household sector, with a particular emphasis on the structure of the system and methods used for setting risk premium rates.
We first provide an overview of the factors that lead to earthquakes and the mechanism by which they occur, assuming that the reader is relatively unfamiliar with seismology. After considering the estimation of earthquake damage, we study methods for setting risk premium rates for earthquake insurance. In particular, since Japan is one of the few nations that has sustained repeated earthquake damage, premium rates are calculated with the utmost objectivity and precision, using loss factors based on data of past losses.
Compared with more common disasters, it is common knowledge that earthquake losses are poor candidates for statistical modeling. Nevertheless, we consider Japan’s earthquake insurance system, which is based on societal demand for assurance of the public’s standard of living and which has been established in conjunction with the legislation of national indemnification, to be one of the few systems in the world to adequately protect against major loss.
Keywords: magnitude, maximum surface acceleration, loss frequency of damage, loss frequency of earthquake-related fires, loss frequency of damage due to tsunami
We first provide an overview of the factors that lead to earthquakes and the mechanism by which they occur, assuming that the reader is relatively unfamiliar with seismology. After considering the estimation of earthquake damage, we study methods for setting risk premium rates for earthquake insurance. In particular, since Japan is one of the few nations that has sustained repeated earthquake damage, premium rates are calculated with the utmost objectivity and precision, using loss factors based on data of past losses.
Compared with more common disasters, it is common knowledge that earthquake losses are poor candidates for statistical modeling. Nevertheless, we consider Japan’s earthquake insurance system, which is based on societal demand for assurance of the public’s standard of living and which has been established in conjunction with the legislation of national indemnification, to be one of the few systems in the world to adequately protect against major loss.
Keywords: magnitude, maximum surface acceleration, loss frequency of damage, loss frequency of earthquake-related fires, loss frequency of damage due to tsunami
Volume
Toyko
Year
1999
Categories
Financial and Statistical Methods
Extreme Event Modeling
Natural Peril Modeling
Earthquake Models
Actuarial Applications and Methodologies
Ratemaking
Large Loss and Extreme Event Loading
Business Areas
Fire and Allied Lines
Practice Areas
International Areas
Publications
ASTIN Colloquium
