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Japan Earthquake Model Fact Sheet
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Japan Earthquake Model
EQECAT's Japan Earthquake Model embodies state-of-the-art earthquake modeling for catastrophic risk in Japan. Incorporated into EQECAT's global multi-peril platform RQE™, (Risk Quantification & Engineering) the model unifies 13 centuries of earthquake history with today's cutting-edge science, and offers region-specific innovations in both hazard and vulnerability. Using full three-dimensional representation of seismic source geometry, EQECAT captures the unique seismic setting that underlies Japan.
Damage from 1995 Kobe, Japan Earthquake
Earthquake Risk in Japan
Japan is home to some of the largest earthquakes across the globe, including the 2011 M9 Tohoku-oki event. The Tohoku earthquake was the fourth-largest and the most costly earthquake ever recorded with estimated economic losses exceeding $200 billion (2011 USD). Although Japan’s population has a high degree of awareness and preparedness for earthquake risk, large earthquakes and their resulting perils represent a grave risk to life, economy, insurers, and insureds.
Japan Quake Features
Key aspects of the Japan earthquake risk model includes the following features:
- Region-Specific Hazard Definition
- Time-Dependent Recurrence Rates
- Model Validation/Expert Review
- Rational Approach to Uncertainty
- Region-Specific Vulnerability Curves
- Lines of Business
- Perils Covered
- Coverage Types
Region-Specific Hazard Definition
EQECAT honors the long tradition of Japanese earthquake science by adhering to customary region-specific use of hazard parameters. From fault definition to recurrence rates to site classification, hazard data gathered from the following Japanese government sources is used in the model:
- National Research Institute for Earth Science and Disaster Prevention
- Earthquake Research Committee of the Headquarters for Earthquake Research Promotion
- Digital National Land Information Database
Vulnerability curves are characterized in terms of peak ground velocity (PGV). Attenuation relations, including those of Japanese researchers Hongjun Si and Saburo Midorikawa, are based on strong ground motion records from Japanese earthquakes, and differentiate according to tectonic environment.
Time-Dependent Recurrence Rates
Time-dependence, used for 157 main inland fault sources and 42 subduction zone sources of potential earthquake rupture, represents definitive scientific consensus while portraying risk in the foreseeable future, not just the theoretical "long-term." EQECAT has used time-dependent recurrence frequencies since 1997, because they reflect the scientifically-accepted physical mechanism of frictional stress build-up at the tectonic plate interface (the fault plane). Deep within the earth, where rock is molten, faults surfaces glide smoothly relative to one another, but at the surface, rocks are solid, thus "locking" the fault. An earthquake occurs when strain from continuous plate motion at depth overcomes frictional resistance of the interlocked surface. An earthquake is more likely to occur on a fault that is "late in its seismic cycle," relative to the average time between large quakes, and less likely on a fault where an earthquake has occurred "recently" (in geologic time).
Model Validation/Expert Review
The model has undergone stringent reviews by experts from rating agencies to validate its use for capital market transactions.
Rational Approach to Uncertainty
EQECAT's approach to uncertainty conforms to scientific consensus for time-dependent frequencies of large earthquakes on the Nankai and Sagami subduction zones. This approach differs from the common use of smaller sigma values, which would imply lower probabilities for large subduction earthquakes impacting Tokyo than the academic literature might suggest. The maximum magnitude associated with a given seismic source is also highly uncertain, and EQECAT accounts for this by using a Gaussian distribution of magnitudes for the largest events in Japan.
Region-Specific Vulnerability Curves
The model uses a full suite of vulnerability curves, including those developed uniquely for structures with seismic-protection systems, such as base-isolation, and region-specific construction practices such as the use of steel columns embedded in concrete, known as Steel Reinforced Concrete (SRC). Vulnerability insight is well-honed from thousands of seismic studies conducted by EQECAT and ABS Consulting over the last 30 years, as well as first-hand observations of 90 earthquakes worldwide, including nine in Japan. Vulnerability is also calibrated to claims from the Kobe (1995), Tottori (2000), and Geiyo (2001) events, representing over 16 trillion yen of exposure data, differentiated by location, age, structure type, and line of business.
Lines of Business
Lines of Business modeled in Japan Quake include:
- Residential
- Commercial
- Industrial
- Kyosai
- Personal Accident
Perils Covered
In addition to calculating losses from ground shaking, the model covers these associated perils:
- Fire Following Earthquake: Conflagration – widespread, uncontrollable fire that is initiated by an earthquake – can be the primary agent of damage. Each contributor to conflagration (ignition, spread, and suppression) is modeled as a physical mechanism.
- Sprinkler Leakage: Water damage to contents from sprinkler leakage can exceed shaking contents damage. The model explicitly accounts for the resulting sprinkler leakage losses.
- Personal Accident: The model includes five options for personal accident policy types.
These associated perils can be included or excluded from analyses. Results for each peril are reported separately. Ground failure hazards, when their potential is known, can be modeled using secondary modifiers.
Coverage Types
The model calculates damage to structures (building damage), contents, and time element (business interruption and additional living expenses). Separate vulnerability functions are used for building and contents damage. Time-element vulnerability is a function of both structural and contents damage.
Model Specifications
Model specifications include:
- Import Resolution
- Hazard Analysis and Soil Data Resolution
- Model Validation/Expert Review
- Geographic Coverage
- Secondary Structure Modifiers
- Lines of Business
- Structure Types and Occupancies
- Model Output
- Financial Modeling
Import Resolution
Exposure data is accepted and geocoded at resolutions of latitude/longitude, postal code, district or city, and prefecture levels. When input data is provided at aggregate levels, the model adds refinement to loss results by disaggregating exposure to a resolution consistent with the hazard generation. The disaggregation scheme is weighted by population distribution.
Hazard Analysis and Soil Data Resolution
Hazard is differentiable at a uniform resolution of 1 km, representing the level of detail for soil type information.
Model Validation/Expert Review
The model has undergone stringent reviews by experts from rating agencies to validate its use for capital market transactions.
Geographic Coverage
The Japan Quake model covers all 47 prefectures of Japan.
Secondary Structure Modifiers
Risk can be differentiated by detailed structural characteristics, including configuration of walls, roof, and connections, as captured by secondary structure modifiers.
Lines of Business
Lines of business (LOB) modeled in the Japan earthquake model include:
- Residential
- Commercial
- Industrial
- Kyosai
- Personal Accident
Structure Types and Occupancies
With a full suite of representative structure types and occupancy categories for each line of business, the model differentiates risk across hundreds of combinations, and allows only realistic pairings of occupancy and construction.
Model Output
Risk metrics include OEP and AEP loss exceedance curves, AAL, TVAR, and simulations of historical events. In addition, RQE’s Year Loss Table (YLT) uniquely features three-dimensional output: simulation year, events, and sample outcomes. Instead of reporting mean losses with standard deviations, each loss in the YLT represents one possible outcome for the associated event. This allows users to retain the full distribution of uncertainty when using model output in dynamic financial analysis and capital modeling. Conventional event loss results and other risk metrics can be derived from the YLT with arithmetic or simple database queries. YLT and event loss results are supported at the portfolio level. Other risk metrics are supported at multiple levels of refinement:
- Total aggregate portfolio
- Postal code or prefecture
- Detailed output by policy and site
Financial Modeling
Insurance policy structures and reinsurance treaty types are modeled. All payout rules used in the Japanese earthquake insurance market, including step policies, are modeled. Payout rules for Zenkyoren type policies are also included in the model.
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