Estimation of earthquake insurance Premium rates Turkish catastrophe insurance pool case

Kestel, Sevtap Ayşe
Earthquakes are the natural catastrophes which have the highest unpredictability; destructive earthquakes appear less frequently in time and space. However, the financial impact of such earthquakes on human lives and economies is disastrous. The prediction on the occurrence of an earthquake in time, magnitude and location is expressed in terms of their joint probabilities. The estimation on the economic losses mainly depend on the properties of the structure. The variability in these variables makes it difficult to collect enough historical information for a precise loss estimation and, hence, for determining a realistic insurance premium. This paper questions how much load should be added to the earthquake insurance premiums which incorporate the influence of the factors being ignored due to the loss of the information. Bayesian regression emphasizing the information needed in optimal premium valuation conditional to the parameter estimates, is employed. The implementation of the proposed method is done for the parameter estimation in Turkish Catastrophe Insurance Pool premiums which aims to yield a limited earthquake coverage in a compulsory insurance scheme.
Citation Formats
B. Z. TEMOÇİN and S. A. Kestel, “Estimation of earthquake insurance Premium rates Turkish catastrophe insurance pool case,” pp. 161–173, 2016, Accessed: 00, 2020. [Online]. Available: