USQuake™ - EQECAT's US Earthquake Model
USQuake™ embodies EQECAT's heritage as earthquake engineering pioneers and continues to set the standard of scientific rigor in catastrophe risk modeling.
USQuake is part of EQECAT's global multi-peril platform RQE™ (Risk Quantification & Engineering) and delivers results unbiased with respect to location through its comprehensive stochastic event set, which is selected using strict tolerance requirements.
Earthquake Risk Model for the United States
All regions of the United States have some degree of earthquake risk. Areas of high risk include California and the Pacific Northwest, as well as the New Madrid region, Memphis, Tennessee and Charleston, South Carolina. EQECAT integrates updated building codes and construction practices with the latest science and engineering to produce this state-of-the-art US earthquake risk model.
Both the hazard and vulnerability components of the USQuake model offer unique modeling innovations, including multi-parameter vulnerability for residential structures and soil-based ground motion functions that accurately capture physical phenomena while eliminating bias.
US Earthquake Model Features
Key aspects of the US earthquake risk model includes the following features:
Soil-Based Attenuation Functions
EQECAT goes one step beyond using "next-generation" attenuation (NGA) functions by using soil-based attenuation (SBA) — a subset of NGA equations that assumes the seismic waves propagate through soil. EQECAT’s SBA approach reduces earthquake modeling uncertainty introduced by applying soil amplification factors to the more conventional rock-based equations. Since the vast majority of insured exposure is located on soil, use of SBA necessitates far less adjustment for site conditions, allowing EQECAT to retain the improved confidence of the NGAs.
Time-Dependent Recurrence Rates
Earthquake modeling results are significantly influenced by recurrence frequencies associated with large earthquakes in the event set. 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 glide smoothly relative to each other. At the surface, rocks are solid, thus "locking" the faults. An earthquake occurs when strain from continuous plate motion at depth overcomes frictional resistance of the interlocked surfaces. 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. Earthquakes are less likely in a fault where an earthquake has occurred "recently" (in geologic time).
In regions such as California where earthquakes are common, time dependence, and thus the EQECAT earthquake model, represents the definitive scientific consensus. USQuake also portrays risk within the foreseeable future and not just the theoretical "long-term."
Stochastic Event Set
EQECAT uses stringent acceptance criteria in the development of the stochastic event set. For example, at any geographic coordinate, the spectral acceleration parameter matches USGS mapped values within 2% for return periods associated with damage. The resolution grid of earthquakes is constant across the landscape. This means consistent results. Since all geographies are modeled with equal confidence, even the most specialized portfolio will be modeled to the same high accuracy as a market portfolio.
Hazard Definition
Hazard definition is based upon the USGS hazard models and rupture forecast released in 2008. Additionally, EQECAT’s US earthquake model captures USGS insights gained since then, including revisions and corrections through the end of 2009.
Vulnerability
The USQuake model incorporates vulnerability curves that are well-honed from thousands of seismic studies conducted by EQECAT and ABS Consulting over the last 30 years. The model’s vulnerability curves are additionally founded on first-hand observations of 90 earthquakes worldwide.
Vulnerability is also calibrated to tens of thousands of claims and exposure data points from the Northridge (1994) and Loma Prieta (1989) events. For residential structures, EQECAT represents vulnerability using a three-dimensional surface to capture the phenomenon of "damage acceleration".
The more damage that occurs during a given quake, the more damageable a building becomes.
By estimating damage from multiple input parameters rather than a single spectral acceleration, EQECAT’s model more accurately reflects the reality evidenced by data from thousands of claims.
Perils Covered
In addition to calculating losses from ground shaking, the USQuake model covers associated perils, which can be included in or excluded from analysis. Results for each peril are reported separately.
Fire Following Earthquake
Conflagration—widespread, uncontrollable fire that is initiated by an earthquake—can be the primary agent of damage. The model incorporates a ground-up methodology to model the physical mechanism of conflagration, its ignition, spread, and suppression.
Sprinkler Leakage
Water damage to contents from sprinkler leakage can exceed shaking contents damage. The model explicitly accounts for the resulting sprinkler leakage losses.
Coverage Types
The model calculates damage to structures (building damage), contents, and time element (business interruption and additional living expenses). Separate, independent vulnerability functions are used for calculating building and contents damage. Time-element vulnerability is a function of both building and contents damage.
Loss Amplification / Demand Surge
EQECAT applies a rational approach to demand surge, based upon the demand and supply for construction materials and labor in the affected region. Since economic factors undergo constant change, EQECAT updates the supply-side database for demand surge with each release.
Model Specifications
The USQuake model helps reinsurance and insurance clients perform a variety of crucial activities, including:
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Understanding US earthquake risk correlation at the site, policy and portfolio levels;
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Pricing and managing US earthquake risk from the site policy and portfolio levels;
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Communicating US earthquake risk to important stakeholders, including rating agencies, regulators, shareholders, counterparties.
Model specifications include:
Import Resolution
Exposure data is accepted and geocoded at resolutions of latitude/longitude, street address, ZIP Code, and county 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.
Model Validation / Expert Review
The hazard and vulnerability modules have undergone stringent peer-review by internationally-recognized scientific experts.
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The methodology used in the hazard module has been reviewed and accepted by USGS scientists, including Dr. Ned Field, the primary author of the Uniform California Earthquake Rupture Forecast (UCERF 2.0).
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The residential vulnerability module has been reviewed and accepted by the Pacific Earthquake Engineering Research Center (PEER).
Hazard Analysis and Soil Data Resolution
Variable resolutions of hazard generation are based on population density and range between 0.01 and 0.1 degrees. Soil condition mapping, one of the most sensitive components of earthquake modeling, uses eight layers of soil map data, each with increasingly fine resolution. Soil maps in high hazard regions with dense population are mapped with a tolerance of 40 feet.
Geographic Coverage
The USQuake model covers the 50 United States and Puerto Rico. The contiguous US comprises a single, unified model featuring cross-border consistency with Canada. Alaska, Hawaii, and Puerto Rico are modeled individually.
Lines of Business
Lines of business include residential, commercial, and industrial, and workers' compensation.
Structure Types and Occupancies
With a full suite of representative structure types, and dozens of occupancy categories for each line of business, the model differentiates risk across hundreds of combinations, and allows only realistic pairings of occupancy and construction. A common set of structure types and occupancies is available worldwide. Our technical documentation provides guidance on structure type selection.
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:
Financial Modeling
All major insurance policy structures and reinsurance treaty types are modeled.
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