Aglaia PETSETI University of Pireaus

1. PROPOSAL FOR A NATIONAL EARTHQUAKE INSURANCE
PROGRAM FOR GREECE
Aglaia A. Petseti
Dept. of Statistics & Insurance Science
University of Piraeus, Greece
Special Swiss Re session on Financial Tools for Disaster Risk Management
Wednesday, 29/Aug/2012
Organized by Swiss Re

2. It is time we face a GREEK Problem!
• Greece is seismically the most active region in the whole
Mediterranean and holds the sixth place globally
• A strong Earthquake occurs approximately every two years
• During the last century there have been more than 40
earthquakes causing human casualties
• During the last three decades the direct cost due to earthquakes
has exceeded 10 bil. EUR
• Historically, the most catastrophic earthquakes have taken place
to areas where 70% of the population is located
• Less than 20% of the country’s building capacity is insured
against Earthquakes !

3. Lessons from 1999 Earthquake in Athens
• The most recent devastating event : it hits Greek Capital City
and does so much damage with only 5,9 R Magnitude (!)
• Total Losses > 3,5 bil EUR; 140 fatalities, 1.600 injured, over
100.000 homeless in Attica, over 100 building collapses (incl. 4
factories), damages to over 70.000 residencies and 8.000
business premises
• Insurance Compensations less than 4% of the total losses: 6.800
residential claims files (average loss 50% of replacement
value), 670 industrial claims files
• AIR Worldwide estimates that the 1999 EQ would cause 1 bil
EUR insured losses if it was to happen a decade later
• State Compensations were inadequate

4. Cresta Zones - Greece
1. THRAKI AND ISLAND OF SAMOTRHRAKI
2. MAKEDHONIA AND ISLAND OF THASOS (EXCL.THESSALONIKI)
3. CITY OF THESSALONIKI
4. IPIROS AND NORTHERN IONIAN ISLANDS (KERKIRA, PAXOI, ETC.)
5. THESSALIA (EXCL. VOLOS)
6. CITY OF VOLOS
7. STEREA ELLAS (EXCL. ATHINAI AND PIRAEUS)
8. EVVOIA
9. CITY OF ATHNAI AND PIRAEUS
10. SOUTHERN IONIAN ISLANDS (LEFKAS,KEFALINIA,ITHAKI,ZAKINTHOS)
11. PELOPONNISOS (EXCL.PATRAI)
12. CITY OF PATRAI
13. NORTHERN SPORADES, LIMNOS, SKYROS, LESVOS, CHIOS, KYKLADES
14. KRITI (EXCL. IRAKLION)
15. CITY OF IRAKLION
16. DODECANESE, RODHOS, KARPATHOS, KOS
Seismic Zones - Greece
Greece is divided into three Zones of Seismic
Exposure according to State Antiseismic
Regulation.
Zone I (blue) represents low exposure, Zone II
(green) represents medium exposure and Zone
III (red) represents the highest exposure.

5. Greece’s Residential Stock
Increase in residential buildings by 26% and increase in number
of houses by 33% (between years 2000 – 2010)
 Total Number of buildings for residential use ≈ 4 mil and total
Number of Houses ≈ 7,5 mil
 Over 1.500.000 houses are built before 1960
 Average surface per house : 85 sq.m2
 Over 50% of the buildings are ground floor constructions
 Construction materials : concrete and masonry for 80% of the
total number of buildings
 Total value of residential stock in Greece (buildings and
contents) is ≈ Euro 900 bil EUR {calculations at 1.100 / sq.m2 for
building and € 400 / sq.m2 for contents}

6. Residential Stock Analysis
1.243.201; 1.532.068; 40,961 22,226 15,181
17% 21% 16,981
1,222,557
1,043,017, 1 771,406 446,676
4% 490,840
3.476.148; 719,701 2,231,365
48% 581,160 735,380
Before 1960
1960-1985 Zone I
Before 1960 1960-1985 1986-1995 1995+ 1986-1995
1995+ Zone II
Figure 1. No of Houses by construction period Figure 2. No of Houses by Seismic Zone Zone III
217,377
122,470 287,730 211,063 181,720 102,244
908,067
95,763 734,737 672,712
318,244
415,034
2,588,721
1 2 3 4 410,779
67,709
5 6 7 8
9 10 11 12 169,863
13 14 15 16
Figure 3. No of Houses by Cresta Zone

7. Residential Stock Analysis
600,000
500,000
400,000
300,000
200,000
100,000
0
1 2 3
4 5
6 7 8 9 10 11
12 13 14 15 Cresta Zones
16
Before 1960 1960 - 1985 1986 - 1995 After 1995 Unknown
Figure 4. Buildings distribution by construction period per Cresta Zone

8. Modeling Earthquake Risk for Greece
Exposure quantification by employing :
 RMS RiskLink version 9.0
 AIR Clasic2 version 12.0.0
 EQE Enterprise version 3.13 and
 IF Elements version 4.8.0.6.
Residential Stock was distributed to the 16 Cresta Zones by
construction period, number of stories, construction type and
value of buildings and contents for modeling purposes.
Resolutions of above catastrophe models varied due to different
parameters and approach.

9. Modeling Earthquake Risk for Greece
Table 1 shows Gross Losses (incl. 2% retention) as an average of all
4 employed models and PML framed by return periods and
expressed as a % of the total value of the residential stock.
Table 1. Gross Losses and PML

10. The Solution
Urgent Need for the formation of a NatCat for Greece subject to:
 Compulsory Insurance
 Insurance available for all houses
 Affordable, risk based and competitive pricing
 Premium Collection / Retention Rate Control (e.g. utility bills)
 Insurance Limit benchmark
 First Loss Cover with no underinsurance penalties
 Substitution of State’s liability to Earthquake losses only
 Local insurers: provision of excess limits covers, claims
handling, contribution in layers structuring

11. Case Scenario
Results of Table 1 if applicable to insurable portfolio as defined by
insurance limit calculations, give Table 2 for 100% and 50%
penetration scenarios respectively.
Exceedance Gross Losses Gross Losses
Probability 100% insurable portfolio 50% insurable portfolio
penetration penetration
Return Period
1 in 5 Year 20% 569.684.407 284.842.203
1 in 10 Year 10% 1.709.053.220 854.526.610
1 in 25 Year 4% 3.418.106.439 1.709.053.220
1 in 50 Year 2% 5.696.844.065 2.848.422.033
1 in 100 Year 1% 9.114.950.504 4.557.475.252
1 in 150 Year 0,67% 11.393.688.130 5.696.844.065
1 in 200 Year 0,50% 13.672.425.756 6.836.212.878
1 in 250 Year 0,40% 15.381.478.976 7.690.739.488
1 in 500 Year 0,20% 21.078.323.041 10.539.161.520
1 in 1,000 Year 0,10% 27.344.851.512 13.672.425.756
Table 2. Gross Losses and PML for the insurable residential portfolio

12. Case Scenario
 50% insurance penetration
 RoL is set to 2,7% on 7 bil EUR Limit
 Surface, construction period and seismic zone for houses are
considered as loading / discount parameters
160
140 140,25
120
112 108,075
100 104
96
89 87
80 80 83 82,5
72 74 71 71
67 69 66
60 61 61 64 50
56 54 57 53 55 55
52 49
43 46 47 65,5
40 39 41 42 42
32 35 36
27 85
20
0
Ζone III; 1986-
Ζone I; 1960 -
Ζone I; 1986-
Ζone II; 1960 -
Ζone III; After
Ζone II; 1986-
Ζone III; 1960 -
Before 1960
Ζone I; Before
Ζone II; Before
Ζone I; After
Ζone II; After
Private Market
Ζone III;
1995
1995
1995
1995
1985
1995
1960
1985
1995
1960
1985
Figure 5. Indicative Program Pricing and Market Comparison

13. No, we definitely can not do much about this…..
Protothema.gr

14. But still we have time to do something about this …..
Beyaz Gazete

15. Thank you for your attention.
Aglaia Petseti
Email: aglaia.petseti@gmail.com
Phone No.: +30 6944 22 50 11
Special Swiss Re session on Financial Tools for Disaster Risk Management
Wednesday, 29/Aug/2012
Organized by Swiss Re