OPTIMAL EARTHQUAKE INSURANCE IN RISK MANAGEMENT

Abstract eng:
A methodology is proposed on how to determine an optimal premium for insurant, associated with earthquake disaster prevention. First, the role of insurance in risk management is discussed and a condition required for admissible premium for building owners is derived in terms of expected loss of insurant and premium which is the part of expected loss transferred to insurance company, plus loading which is the commission of the company. Second, a methodology is proposed to determine an optimal premium such that the expected annual loss of insurant becomes minimum. Third, optimization of life cycle cost is discussed taking into account the insurance cost. Finally, a numerical example for an office building is carried out to justify the methodology.

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