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Pricing Earthquake Exposure Using Modeling, Debra L. Werland, Joseph W. Pitts

Journal of Actuarial Practice (1993-2006)

This paper demonstrates a practical methodology for determining a statewide rate level indication for the earthquake insurance and for determining more equitable territorial relativities within a state. The methodology is based on the output from a certain commercially available earthquake modeling software package. The methodology addresses some of the complex issues involved in pricing earthquake insurance exposure and potential regulatory acceptance. The paper also features a section dealing with the net cost of reinsurance in the proposed direct rates. A final consideration is the treatment of a model's output when it is believed the modeled results art' less than fully …