California city skyscrapers may be less vulnerable to earthquake damage than previously thought, according to a brokerage firm's analysis of changes in the scientific view of U.S. seismic hazard.

London-based Willis Group Holdings said in its report that tall buildings in the Sunshine State may experience less shaking in a large earthquake than assumed in prior years.

As a result, Willis said, vendors' U.S. earthquake catastrophe models will be recalibrated and seismic hazard changes detailed in the report may be offset or amplified by changes to other modeling components.

Willis said the report has been added to the curriculum of the Associate in Reinsurance (ARe) designation program, offered by the American Institute for Chartered Property Casualty Underwriters and the Insurance Institute of America.

The report contains detailed regional maps illustrating the results of two recent academic research papers: the "2008 National Seismic Hazard Maps" and the "2007 Uniform California Earthquake Rupture Forecast."

"This report lays the ground work for understanding the new scientific view of earthquake risk in the United States.," noted Julie Serakos, executive vice president, Willis Catastrophe Management Services.

She said the report is a starting point for assisting insurers "with making appropriate decisions to manage their earthquake risk going forward."

The report discusses the finding that greatest magnitude changes in seismic risk have occurred in California, with significant but lesser changes in the Pacific Northwest. Scientific measurements from recent large earthquakes around the world indicate less shaking for tall California buildings, which translates into less damage from a quake.

As an example, the report states that a 20 percent decrease in hazard can equal a 30-to-50 percent decrease in expected damage.

The report noted the Uniform California Earthquake Rupture Forecast indicates a 99.7 chance of a 6.7 earthquake in the next 30 years and in the same period there is a 46 percent chance of a 7.5 earthquake. Chances of an earthquake in the southern part of the state are more than double the possibility of a quake in the northern region.

New probabilities calculated for the Elsinore and San Jacinto Faults in southern California are about half of the previous predictions, Willis's report said.

For the Midwest's New Madrid quake region the report said the shake hazard for two-story buildings could decrease to between 5 percent and 25 percent for a 475-year quake.

Willis said the earthquake models of risk to structure coverage for 10-story buildings may decrease in the new models, but that new methods for modeling demand surge cost increases may offset some of these changes.

"Risk managers and insurance executives are confronted by an array of obstacles when understanding the current scientific view of seismic hazard," said Kyle Beatty, vice president, Willis Catastrophe Management Services. "We expect this report, and others to follow, will help them formulate a more comprehensive picture of the key issues at hand."

The report is online at http://www.willisre.com/html/reports/catastrophe/Willis_Report_Preparing_for_a_New_View_of_US_EQ_Risk.pdf.

Special Reports /

Quake Damage Forecasts Moderate, Willis Reports

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