The behavior of a particular industrial or residential facility during a strong earthquake is not generic. Many factors contribute to its seismic behavior and possible damage. Factors like its structural system, maintenance, age, surrounding local conditions, foundation soil characteristics, geographic location, and redundancy, among others, will contribute to the seismic behavior, the expected damage, and the financial loss due to the material damage and the interruption of the functionality of the facility.
The main objective of the seismic risk studies offered by our experts is to estimate the financial probable maximum loss (PML) due to material damage and business interruption (BI), and to provide insight into possible reduction of this loss.
To reach this objective, several steps must be taken. The first step is to define the seismic level at the site associated with a certain period. This seismic level should be consistent with existing local codes and any other local seismicity study. Then, a visit to the facility is conducted to understand its current structural condition, its surroundings, soil, topography, and to identify seismic vulnerabilities due to deficiencies, age, maintenance, and modifications. Based on this visit and experience from past earthquakes, a series of possible damage scenarios is defined. These scenarios are used to estimate the associated financial loss due to the material damage (replacement value). These damage scenarios are also used to determine, together with plant personnel, a realistic business interruption time and associated financial loss. The final PML values is the combination of the losses due to the material damage and business interruption.
The final step in this approach is to provide basic recommendations to reduce the potential seismic damage and associated financial loss.
A professional seismic risk study for a facility, and the calculation of the maximum probable losses associated with this risk, identifies, understands, and quantifies the negative elements that increase the probability of damage to this facility and its financial consequences. At the same time, it can identify positive elements that contribute to reducing the magnitude of damage and its consequences.
The identification and quantification of these negative elements allows corrective measures to be taken prior to the seismic event, significantly reducing possible damage and its impact on the operation of the facilities.
In addition, these studies help to adjust contingency plans, which allows reducing the period of stoppage of operations and developing alternative measures to maintain business continuity.
From an insurance perspective, these studies generate confidence in the reinsurance market. The identification, quantification, and reduction of risks in a company results in a lower risk rate than what would be obtained if these analyses were not carried out.