1. Analysis of Earthquake Risk Exposure for China Milan Simic, Benfield 3 June 2003

2. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 background what do we need to quantify earthquake risk? ­hazard ­exposure ­vulnerability ­loss calculation conclusions - way forward Presentation overview

3. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 third largest country in the world 2001 population ~1.3b GDP growth in excess of 7% a year 2001 joined WTO insurance premium statistics according to: ­CIRC – China Insurance Regulatory Commission ­Swiss Re Background – key facts

4. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Background – insurance premium ratio non-life to life premiums from 2:1 in early 1990s to 1:2-3 now Year CIRC total ($b) Swiss Re total ($b) CIRC increase (%) CIRC non-life ($b) Swiss Re non-life ($b) CIRC increase (%) 199916.917.0-6.56.3- 200019.3 147.28.911 200125.426.0328.39.915 200236.9 459.4n/a13

5. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Background – historic earthquakes historic earthquakes M>6 780BC to 1994AD 1556 Guanzhong, M=8 1668 Shandong, M=8.5 1303 Linfen, M=8 1739 Ningxia, M=8 1920 Haiyuan, M=8.5 1976 Tangshan, M=7.8

6. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Background - fatalities historic earthquake fatalities (official) RGCER (Research Group on Chinese Earthquake Risk) and Munich Re YearNameMagnitudeRGCERMunich Re 1303Linfen8200,000 1556Guanzhong8830,000 1622Anxiang712,000150,000 1668Shandong8.550,000 1739Ningxia865,00050,000 1850Sichuan7.520,650300,000 1920Haiyuan8.5234,117235,000 1976Tangshan7.8242,769290,000

7. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Catastrophe model components insured loss location coverage portfolio exposure data location characteristics physical model location intensity damage function location type synthetic event generation location intensity parameters spatial temporal physical historic event catalogue location intensity probability distribution frequency severity loss hazard insurance coverage limits deductibles exposure vulnerability

8. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China physical background of hazard - tectonic setting 2 subduction zones under Eurasian plate and strong intra- plate deformation caused by complex stress fields

9. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China physical background of hazard - 7 regions and faults ­I – Xingjiang (compression faults) ­II - Qinghai-Tibet Plateau (subduction – strongest earthquakes) ­III - Northeast China (relatively quiet) ­IV - North China (normal and strike/slip faults) ­V - South China (relatively quiet) ­VI - Taiwan ­VII - South China Sea

10. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China geographical distribution of hazard collect historic catalogues and create synthetic ones basic catalogue information: time, source, depth, M major (M>6) earthquakes between 780BC and 1994AD CSB catalogues between 1831BC and 1979?

11. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 ground shaking (example of damage - soft storey collapse in 1999 Chi-Chi earthquake) shaking hazard measured either through intensity or instrumentally Earthquake hazard in China - shaking

12. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China – shaking intensity intensity contours (1920 Haiyuan, M=8.5)

13. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China – surface faulting ground failure (surface faulting in 1976 Tangshan, M=7.8 earthquake) failure by shear or extension identify surface faults in catalogue

14. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China – landslides ground failure (landslide on Miyun reservoir dam in 1976 Tangshan, M=7.8 earthquake) collect or create landslide susceptibility maps

15. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China – liquefaction ground failure (liquefaction in 1976 Tangshan, M=7.8 earthquake) collect or create liquefaction susceptibility maps

16. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China – FFE estimate number of ignitions from floor area and PGA fire spread needs to be modelled fire suppression time needs to be obtained or calculated from building type and layout

17. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Earthquake hazard in China – tsunami tsunamigenic earthquakes to be identified in catalogue hazard measured through existing tsunami run- up and inundation maps

18. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 aggregation ­selection of appropriate aggregation unit (CRESTA may not be fine enough) ­administrative and/or postal boundaries specific portfolio information ­value ­LOB/coverage (generally commercial/industrial only) ­limits/deductibles ­age/style/construction type ­population/GDP as surrogate when insurance information scarce Exposure - aggregation

19. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Exposure – provinces 22 provinces + 5 autonomous regions + 4 municipalities (Beijing, Tianjing, Shanghai and Chongqing) = 31 + Taiwan, Hong Kong, Macao old CRESTA zones were provinces aggregates still mainly provided at this level

20. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Exposure – CRESTA zones CRESTA zones declared as first 2-digit postcodes July 2002 aggregates rarely provided at this level

21. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 standard GUOBIAO codes State Statistical Bureau 31 provinces ~2,500 counties Exposure – administrative regions

22. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 administrative region hierarchy ­31 provinces ­~2,500 counties (XIAN) ­cities/municipalities (SHI) ­rural towns (ZHEN) } ~12,500 ­urban districts for 4 municipalities (QU) 1990 and 2000 census differences (~12,500 vs. ~ 25,000) significant mapping uncertainties (different sources and providers) Exposure – administrative regions

23. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 2-digit postcodes 4-digit postcodes (~counties) 6-digit postcodes (~cities, towns and urban districts) Exposure – postcodes

24. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 importance of resolution Exposure – resolution

25. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 relationship between ground shaking and damage ratio empirical approach ­observed loss data very limited ­mainly intensity based (MMI, JMA etc.) ­Seismic Intensity Zoning Map of China by CSB (1990) engineering approach ­design codes, construction practices and standards ­mainly instrument based (PGA, PGV, Sa etc.) ­Seismic Zoning Map of China by CSB (1999) whole or component/assembly approach Vulnerability

26. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Vulnerability MMI DrDr 50% 100% Dr (%) MMI Type 3 Type 2 Type 1 damage probability matrices available for China functions of ground shaking (MMI) to give damage ratio (Dr) building classification important

27. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 RGCER’s Atlas of Earthquake Risk Prediction in China 1995 RGCER’s loss modelling results based on GDP/population data historic experience long but potentially incomplete deterministic: analysis of postulated or historic events probabilistic: modelling of ‘synthetic’ events to capture full hazard potential financial/statistical component Loss calculation

28. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 RGCER’s expected building losses between 1995 and 2005 Loss calculation

29. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 Loss calculation - results loss ($) return period of loss (years) Model 3 Model 2 Model 1 loss exceedance curves uncertainty (best estimate, PML, upper bound…) several models model certification?

30. The information contained in this document is strictly proprietary and confidential. ©Benfield 2003 risk quantification (via catastrophe modelling) is the first step of any risk transfer cat models are relatively complex uncertainty needs to be measured and understood how many models are we going to see? is there a role for certification? government role in risk transfer? Conclusions - way forward