Debra L. Werland and Joseph W. Pitts
Abstract
This paper demonstrates a practical methodology for determining a statewide rate level indication for the earthquake insurance and for determining more equitable territorial relativities within a state. The methodology is based on the output from a certain commercially available earthquake modeling software package. The methodology addresses some of the complex issues involved in pricing earthquake insurance exposure and potential regulatory acceptance. The paper also features a section dealing with the net cost of reinsurance in the proposed direct rates. A final consideration is the treatment of a model’s output when it is believed the modeled results are less than fully credible.
Key words and phrases: catastrophe modeling, reinsurance, target rate of return, zone relativities
Debra L. Werland