Flood hazard alteration and natural catastrophe insurance

Tavanaie Marvi, Morteza

Permalink

https://hdl.handle.net/2142/115435 Copy

Description

Title

Flood hazard alteration and natural catastrophe insurance

Author(s)

Tavanaie Marvi, Morteza

Issue Date

2022-04-22

Director of Research (if dissertation) or Advisor (if thesis)

Linders, Daniel H

Doctoral Committee Chair(s)

• Linders, Daniel H
• Cai, Ximing

Committee Member(s)

• Feng, Runhuan
• Lombardo, Franklin T

Department of Study

Civil & Environmental Eng

Discipline

Civil Engineering

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Nat Cat risk
• insurability
• CAT bond
• risk decomposition
• parametric bond
• correlated risk
• systematic risk
• catastrophe risk management
• natural hazard assessment
• vulnerability
• fragility
• flood risk analysis
• flood damage estimation
• damage function
• flood hazard alteration
• earthquake impacts
• stormwater collection network
• natural catastrophe modeling
• natural catastrophe insurance
• pipe breaks
• earthquake-generated debris
• Seaside

Abstract

Flood risk analysis and its components are discussed in this dissertation as a literature review of the topic. The components include the flood hazard model, flood exposure model, flood vulnerability model, and in the case of insurance, the flood insurance model. How those models should be set up and run is explained in detail. Each model is discussed with its components and features. Flood vulnerability models for building structure and contents are reviewed. It is explained that the damage assessment is conducted for building structure and contents based on two approaches: 1) real data and empirical models 2) what-if analysis and analytical models. Differences in damage analysis of a building structure and its contents are explained. Flood factors influencing damage to a building structure and its contents are presented. How a method considers some of those flood factors is described. The limitations and shortcomings of each method alongside their advantages and strength are discussed. The lack of reliable data is one of the main issues for both model construction and validation with the methods in both categories. Inability to convey uncertainty is the other main issue identified in the literature. In the context of flood risk analysis, earthquakes can alter the flood hazard in a region by impacting the components of the stormwater drainage system. A methodology is proposed in this dissertation to measure flood hazard alteration after an earthquake. The main focus of the study is on flood hazard alteration as a result of the direct impacts of the earthquake on the minor drainage system. The minor drainage system is the stormwater collection network whose components such as pipelines and inlets are vulnerable to earth movements. Cracks and breaks are considered the impacts of the earthquake on the pipelines, and inlet blockage because of earthquake-generated debris is considered the impact on the network inlets. The methodology is applied to an entire mid-size city to prove its scalability. Several metrics for flood hazard alteration are defined and measured for the case study which clearly shows the flood hazard alteration after the earthquake. The metrics are presented in both spatially variable and aggregated formats. As a natural hazard, flood is considered uninsurable like other natural catastrophe risks. Insurability of risk is investigated through nine criteria that are categorized into three classes: 1) Actuarial 2) Market and 3) Societal criteria. These criteria and their requirements are explained in detail. Natural catastrophe risks are studied if and how they may or may not meet the requirements of each criterion. It is shown that most criteria (7 out of 9) are not satisfied in the case of natural catastrophe risks. Thus, risk carriers such as insurers use risk transfer alternatives to insure against natural catastrophe risks. Reinsurance, catastrophe futures and options, catastrophe bonds, and sidecars are among the alternatives discussed in this dissertation, and the pros and cons of each alternative are explained. It is argued that Nat Cat risks are not insurable by traditional insurance mainly because of producing highly correlated losses. The source of such correlation among buildings of a region subject to a natural hazard is discussed. A decomposition method is proposed to split Nat Cat risk into idiosyncratic (and hence insurable) risk and systematic risk (carrying the correlated part). It is explained that the systematic risk can be transferred to capital markets using a set of parametric CAT bonds. Premium calculation is presented for insuring the decomposed risk. Portfolio risk-return trade-off measures for investing in the parametric CAT bond are derived. Multi-regional and multi-hazard parametric CAT bonds are introduced to reduce the risk of investment. The methodology is applied to a region with about 3’000 residential buildings subject to a flood hazard.

Graduation Semester

2022-05

Type of Resource

Thesis

Copyright and License Information

Copyright 2022 Morteza Tavanaie Marvi

Owning Collections