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Images, Alexander Turnbull Library

A man representing New Zealand reads a newspaper whose headline is ''Quake may cost insurance co's up to $16B'. Above him is an enormous mosquito that represents 'increased premiums' and that is about to suck the blood out of him; it casts a huge menacing shadow in which the man stands. Context - Insurance companies have experienced massive losses after the Canterbury earthquake. This may ultimately result in higher premiums as insurance companies try to recoup from their loss. According to Chris Ryan, Insurance Council chief executive, "The quake would probably result in foreign reinsurance companies increasing the premiums they charged local insurers." (Stuff 9 Sep 2010) Quantity: 1 digital cartoon(s).

Research papers, University of Canterbury Library

In September 2010 and February 2011, the Canterbury region experienced devastating earthquakes with an estimated economic cost of over NZ$40 billion (Parker and Steenkamp, 2012; Timar et al., 2014; Potter et al., 2015). The insurance market played an important role in rebuilding the Canterbury region after the earthquakes. Homeowners, insurance and reinsurance markets and New Zealand government agencies faced a difficult task to manage the rebuild process. From an empirical and theoretic research viewpoint, the Christchurch disaster calls for an assessment of how the insurance market deals with such disasters in the future. Previous studies have investigated market responses to losses in global catastrophes by focusing on the insurance supply-side. This study investigates both demand-side and supply-side insurance market responses to the Christchurch earthquakes. Despite the fact that New Zealand is prone to seismic activities, there are scant previous studies in the area of earthquake insurance. This study does offer a unique opportunity to examine and document the New Zealand insurance market response to catastrophe risk, providing results critical for understanding market responses after major loss events in general. A review of previous studies shows higher premiums suppress demand, but how higher premiums and a higher probability of risk affect demand is still largely unknown. According to previous studies, the supply of disaster coverage is curtailed unless the market is subsidised, however, there is still unsettled discussion on why demand decreases with time from the previous disaster even when the supply of coverage is subsidised by the government. Natural disaster risks pose a set of challenges for insurance market players because of substantial ambiguity associated with the probability of such events occurring and high spatial correlation of catastrophe losses. Private insurance market inefficiencies due to high premiums and spatially concentrated risks calls for government intervention in the provision of natural disaster insurance to avert situations of noninsurance and underinsurance. Political economy considerations make it more likely for government support to be called for if many people are uninsured than if few people are uninsured. However, emergency assistance for property owners after catastrophe events can encourage most property owners to not buy insurance against natural disaster and develop adverse selection behaviour, generating larger future risks for homeowners and governments. On the demand-side, this study has developed an intertemporal model to examine how demand for insurance changes post-catastrophe, and how to model it theoretically. In this intertemporal model, insurance can be sought in two sequential periods of time, and at the second period, it is known whether or not a loss event happened in period one. The results show that period one demand for insurance increases relative to the standard single period model when the second period is taken into consideration, period two insurance demand is higher post-loss, higher than both the period one demand and the period two demand without a period one loss. To investigate policyholders experience from the demand-side perspective, a total of 1600 survey questionnaires were administered, and responses from 254 participants received representing a 16 percent response rate. Survey data was gathered from four institutions in Canterbury and is probably not representative of the entire population. The results of the survey show that the change from full replacement value policy to nominated replacement value policy is a key determinant of the direction of change in the level of insurance coverage after the earthquakes. The earthquakes also highlighted the plight of those who were underinsured, prompting policyholders to update their insurance coverage to reflect the estimated cost of re-building their property. The survey has added further evidence to the existing literature, such as those who have had a recent experience with disaster loss report increased risk perception if a similar event happens in future with females reporting a higher risk perception than males. Of the demographic variables, only gender has a relationship with changes in household cover. On the supply-side, this study has built a risk-based pricing model suitable to generate a competitive premium rate for natural disaster insurance cover. Using illustrative data from the Christchurch Red-zone suburbs, the model generates competitive premium rates for catastrophe risk. When the proposed model incorporates the new RMS high-definition New Zealand Earthquake Model, for example, insurers can find the model useful to identify losses at a granular level so as to calculate the competitive premium. This study observes that the key to the success of the New Zealand dual insurance system despite the high prevalence of catastrophe losses are; firstly the EQC’s flat-rate pricing structure keeps private insurance premiums affordable and very high nationwide homeowner take-up rates of natural disaster insurance. Secondly, private insurers and the EQC have an elaborate reinsurance arrangement in place. By efficiently transferring risk to the reinsurer, the cost of writing primary insurance is considerably reduced ultimately expanding primary insurance capacity and supply of insurance coverage.

Research papers, University of Canterbury Library

A seismic financial risk analysis of typical New Zealand reinforced concrete buildings constructed with topped precast concrete hollow-core units is performed on the basis of experimental research undertaken at the University of Canterbury over the last five years. An extensive study that examines seismic demands on a variety of multi-storey RC buildings is described and supplemented by the experimental results to determine the inter-storey drift capacities of the buildings. Results of a full-scale precast concrete super-assemblage constructed and tested in the laboratory in two stages are used. The first stage investigates existing construction and demonstrates major shortcomings in construction practice that would lead to very poor seismic performance. The second stage examines the performance of the details provided by Amendment No. 3 to the New Zealand Concrete Design Code NZS 3101:1995. This paper uses a probabilistic financial risk assessment framework to estimate the expected annual loss (EAL) from previously developed fragility curves of RC buildings with precast hollow core floors connected to the frames according to the pre-2004 standard and the two connection details recommended in the 2004 amendment. Risks posed by different levels of damage and by earthquakes of different frequencies are examined. The structural performance and financial implications of the three different connection details are compared. The study shows that the improved connection details recommended in the 2004 amendment give a significant economic payback in terms of drastically reduced financial risk, which is also representative of smaller maintenance cost and cheaper insurance premiums.

Research papers, University of Canterbury Library

The earthquake engineering community is currently grappling with the need to improve the post-earthquake reparability of buildings. As part of this, proposals exist to change design criteria for the serviceability limit state (SLS). This paper reviews options for change and considers how these could impact the expected repair costs for typical New Zealand buildings. The expected annual loss (EAL) is selected as a relevant measure or repair costs and performance because (i) EAL provides information on the performance of a building considering a range of intensity levels, (ii) the insurance industry refers to EAL when setting premiums, and (iii) monetary losses are likely to be correlated with loss of building functionality. The paper argues that because the expected annual loss is affected by building performance over a range of intensity levels, the definition of SLS criteria alone may be insufficient to effectively limit losses. However, it is also explained that losses could be limited effectively if the loadings standard were to set the SLS design intensity considering the potential implications on EAL. It is shown that in order to achieve similar values of EAL in Wellington and Christchurch, the return period intensity for SLS design would need to be higher in Christchurch owing to differences in local hazard conditions. The observations made herein are based on a simplified procedure for EAL estimation and hence future research should aim to verify the findings using a detailed loss assessment approach applied to a broad range of case study buildings.

Research papers, University of Canterbury Library

With sea level rise (SLR) fast becoming one of the most pressing matters for governments worldwide, there has been mass amounts of research done on the impacts of SLR. However, these studies have largely focussed on the ways that SLR will impact both the natural and built environment, along with how the risk to low-lying coastal communities can be mitigated, while the inevitable impacts that this will have on mental well-being has been understudied. This research has attempted to determine the ways in which SLR can impact the mental well-being of those living in a low-lying coastal community, along with how these impacts could be mitigated while remaining adaptable to future environmental change. This was done through conducting an in-depth literature review to understand current SLR projections, the key components of mental well-being and how SLR can influence changes to mental well-being. This literature review then shaped a questionnaire which was distributed to residents of the New Brighton coastline. This questionnaire asked respondents how they interact with the local environment, how much they know about SLR and its associated hazards, whether SLR causes any level of stress or worry along with how respondents feel that these impacts could be mitigated. This research found that SLR impacts the mental well-being of those living in low-lying coastal communities through various methods: firstly, the respondents perceived risk to SLR and its associated hazards, which was found to be influenced by the suburbs that respondents live in, their knowledge of SLR, their main sources of information and the prior experience of the Canterbury Earthquake Sequence (CES). Secondly, the financial aspects of SLR were also found to be drivers of stress or worry, with depreciating property values and rising insurance premiums being frequently noted by respondents. It was found that the majority of respondents agreed that being involved in and informed of the protection process, having more readable and accurate information, and an increased engagement with community events and greenspaces would help to reduce the stress or worry caused by SLR, while remaining adaptable to future environmental change.

Research papers, University of Canterbury Library

In the last century, seismic design has undergone significant advancements. Starting from the initial concept of designing structures to perform elastically during an earthquake, the modern seismic design philosophy allows structures to respond to ground excitations in an inelastic manner, thereby allowing damage in earthquakes that are significantly less intense than the largest possible ground motion at the site of the structure. Current performance-based multi-objective seismic design methods aim to ensure life-safety in large and rare earthquakes, and to limit structural damage in frequent and moderate earthquakes. As a result, not many recently built buildings have collapsed and very few people have been killed in 21st century buildings even in large earthquakes. Nevertheless, the financial losses to the community arising from damage and downtime in these earthquakes have been unacceptably high (for example; reported to be in excess of 40 billion dollars in the recent Canterbury earthquakes). In the aftermath of the huge financial losses incurred in recent earthquakes, public has unabashedly shown their dissatisfaction over the seismic performance of the built infrastructure. As the current capacity design based seismic design approach relies on inelastic response (i.e. ductility) in pre-identified plastic hinges, it encourages structures to damage (and inadvertently to incur loss in the form of repair and downtime). It has now been widely accepted that while designing ductile structural systems according to the modern seismic design concept can largely ensure life-safety during earthquakes, this also causes buildings to undergo substantial damage (and significant financial loss) in moderate earthquakes. In a quest to match the seismic design objectives with public expectations, researchers are exploring how financial loss can be brought into the decision making process of seismic design. This has facilitated conceptual development of loss optimisation seismic design (LOSD), which involves estimating likely financial losses in design level earthquakes and comparing against acceptable levels of loss to make design decisions (Dhakal 2010a). Adoption of loss based approach in seismic design standards will be a big paradigm shift in earthquake engineering, but it is still a long term dream as the quantification of the interrelationships between earthquake intensity, engineering demand parameters, damage measures, and different forms of losses for different types of buildings (and more importantly the simplification of the interrelationship into design friendly forms) will require a long time. Dissecting the cost of modern buildings suggests that the structural components constitute only a minor portion of the total building cost (Taghavi and Miranda 2003). Moreover, recent research on seismic loss assessment has shown that the damage to non-structural elements and building contents contribute dominantly to the total building loss (Bradley et. al. 2009). In an earthquake, buildings can incur losses of three different forms (damage, downtime, and death/injury commonly referred as 3Ds); but all three forms of seismic loss can be expressed in terms of dollars. It is also obvious that the latter two loss forms (i.e. downtime and death/injury) are related to the extent of damage; which, in a building, will not just be constrained to the load bearing (i.e. structural) elements. As observed in recent earthquakes, even the secondary building components (such as ceilings, partitions, facades, windows parapets, chimneys, canopies) and contents can undergo substantial damage, which can lead to all three forms of loss (Dhakal 2010b). Hence, if financial losses are to be minimised during earthquakes, not only the structural systems, but also the non-structural elements (such as partitions, ceilings, glazing, windows etc.) should be designed for earthquake resistance, and valuable contents should be protected against damage during earthquakes. Several innovative building technologies have been (and are being) developed to reduce building damage during earthquakes (Buchanan et. al. 2011). Most of these developments are aimed at reducing damage to the buildings’ structural systems without due attention to their effects on non-structural systems and building contents. For example, the PRESSS system or Damage Avoidance Design concept aims to enable a building’s structural system to meet the required displacement demand by rocking without the structural elements having to deform inelastically; thereby avoiding damage to these elements. However, as this concept does not necessarily reduce the interstory drift or floor acceleration demands, the damage to non-structural elements and contents can still be high. Similarly, the concept of externally bracing/damping building frames reduces the drift demand (and consequently reduces the structural damage and drift sensitive non-structural damage). Nevertheless, the acceleration sensitive non-structural elements and contents will still be very vulnerable to damage as the floor accelerations are not reduced (arguably increased). Therefore, these concepts may not be able to substantially reduce the total financial losses in all types of buildings. Among the emerging building technologies, base isolation looks very promising as it seems to reduce both inter-storey drifts and floor accelerations, thereby reducing the damage to the structural/non-structural components of a building and its contents. Undoubtedly, a base isolated building will incur substantially reduced loss of all three forms (dollars, downtime, death/injury), even during severe earthquakes. However, base isolating a building or applying any other beneficial technology may incur additional initial costs. In order to provide incentives for builders/owners to adopt these loss-minimising technologies, real-estate and insurance industries will have to acknowledge the reduced risk posed by (and enhanced resilience of) such buildings in setting their rental/sale prices and insurance premiums.