L4: CAT modelling for DRR

Question 1

How do engineers quantify risk?

Answer 1

LOSSES: financial, casualties, downtime

Question 2

What are RELEVANT natural loss events?

Answer 2

events that have caused at least one fatality and/or produced normalised losses of over US$ 100k, 300k, 1m, or 3m (depending on assigned World Bank income group of affected country)

Question 3

What are CATASTROPHIC natural loss events?

Answer 3

events that have caused 1000+ fatalities and/or produced normalised losses of over US$ 100m, 300m, 1bn, or 3bn (depending on assigned World Bank income group)

Question 4

How are damage functions derived?

Answer 4

Level 1: Simplified dynamic analysis
Level 2: Claims data
Level 3: Complex dynamic analysis
Level 4: Experimental testing

Question 5

How are losses expressed?

Answer 5

in terms of Expected Annual Loss (EAL), can be building-by-building or total

Question 6

Disaster Risk Financing: Traditional Insurance adv/dis

Answer 6

Pay-out basis: claims, i.e. actual losses
ADV: pay-out loss sustained
DIS: v slow process; pay-out only pays insured assests

Question 7

Disaster Risk Financing: CAT Bonds, what are they?

Answer 7

Earthquake risks transferred to financial markets;
Investors purchase bonds from third party and receive high return;
If trigger event occurs, principal released to sponsor;
If no trigger, principal + profit returned to investors

Question 8

CAT Bonds: ADV/DIS

Answer 8

ADV: immediate pay-out
DIS: pay-out bias risk