Modelling seismic hazard in earthquake loss models with spatially distributed exposure

The prediction of possible future losses from earthquakes, which in many cases affect structures that are spatially distributed over a wide area, is of importance to national authorities, local governments, and the insurance and reinsurance industries. Generally, it is necessary to estimate the effects of many, or even all, potential earthquake scenarios that could impact upon these urban areas. In such cases, the purpose of the loss calculations is to estimate the annual frequency of exceedance (or the return period) of different levels of loss due to earthquakes: so-called loss exceedance curves. An attractive option for generating loss exceedance curves is to perform independent probabilistic seismic hazard assessment calculations at several locations simultaneously and to combine the losses at each site for each annual frequency of exceedance. An alternative method involves the use of multiple earthquake scenarios to generate ground motions at all sites of interest, defined through Monte-Carlo simulations based on the seismicity model. The latter procedure is conceptually sounder but considerably more time-consuming. Both procedures are applied to a case study loss model and the loss exceedance curves and average annual losses are compared to ascertain the influence of using a more theoretically robust, though computationally intensive, procedure to represent the seismic hazard in loss modelling.