Generators of Seismic Events and Losses: Scenario-based Insurance Optimization

A principal difficulty in insuring catastrophic risks is the insufficiency of disaggregated historical data on the catastrophe losses. The lack of data and complex spatial and dynamic interdependencies between catastrophic events imply the necessity to base the insurance of property against natural hazards on catastrophe modeling. The purpose of this research is to develop a working tool for increasing capacity of insurance networks, which insure property against earthquakes. This includes a generator of earthquake scenarios and losses, which is based on seismic maps and geophysical formulas. The outputs of the generator serve as inputs for a procedure, which finds an optimal structure of a network of insurance companies. A “guaranteed” approach to finding coverage of the insurance companies is outlined.