Catastrophe risk modeling and application-risk assessment for Taiwan residential earthquake insurance POOL

Taiwan lies at earthquake-prone area. More than 200 sensible earthquakes occurred every year in Taiwan. Average annual loss due to 83 disastrous earthquakes since 1900 is about NT$19 billion dollars which equals to 0.7% GDP. Therefore, the Taiwan Residential Earthquake Insurance Pool (TREIP) was created by the Taiwan Ministry of Finance (MOF) to facilitate a risk sharing mechanism between private insurance companies and the Government covering insured residential earthquake losses. In this paper, we have built up an event-based seismic hazard assessment and financial analysis model for earthquake disasters. As we know, low occurrence rate, tremendous loss and high uncertainty are characteristics of earthquake disasters. For the above issues, the model we built integrates knowledge from many fields including earth science, seismology, geology, risk management, structural engineering, the insurance profession, financial engineering and facility management. The model use the Monte Carlo simulation technology can construct an annual exceeding probability curve, which relates probability to size of loss, the specific event loss and allows for the evaluation of different insurance and reinsurance programs.