Seismic insurance model for the Italian residential building stock

The expected life-cycle cost can be regarded as a benchmark variable in decision making problems involving insurance policy making for existing structures in seismic risk prone areas. The present study is a preliminary study aiming to calculate the expected insurance premium for Italian building stock subjected to seismic action in its service lifetime based on probabilistic seismic loss assessment. The proposed methodology leads to probabilistic assessment of the structural performance, expressed in terms of the discrete structural limit state exceedance probabilities, and the life cycle cost taking into account the Italian seismic zonation and the seismic vulnerability of the existing life stock. The expected insurance premium can then be evaluated based on the probabilities that the structure exceeds a set of discrete limit state thresholds and the average costs associated to them. The methodology is implemented in an illustrative numerical example which considers the Italian residential building stock discretized in 5 structural typologies and in 8088 areas, corresponding to the Italian municipalities. A monopoly market-based insurance model is built, assuming risk aversion of the property owners and risk neutrality of the insurance companies. The expected insurance premium is evaluated for each structural typology in each Italian municipality, taking into account also the maximum coverage and the insurance excess systems. Results are aggregated to compute the total annual expected loss for the entire Italian building stock, and the total income and profit margin for the insurance company assuming an insurance contract for all the property owners.