Abstract
The devastating consequences of tsunamis on coastal infrastructure have highlighted the urgent need for effective disaster risk reduction strategies. To mitigate tsunami disasters, the insurance industry plays a vital role in implementing risk transfer measures by providing financial protection against asset damage. However, the current research on catastrophe insurance policies for coastal infrastructure lacks consideration of climate change effects. It is essential to take into account the non-stationary effects of sea-level rise to develop long-term tsunami disaster mitigation measures and promote socioeconomic resilience in coastal communities. This paper aims to provide an insurance portfolio optimization framework for coastal residential buildings subjected to tsunamis considering non-stationary sea-level rise effects based on a stochastic simulation approach. A spatiotemporal probabilistic sea-level rise hazard assessment is carried out by utilizing available climate models and considering several emission scenarios. Tsunami propagation analyses under various sea-level rise cases are performed to evaluate the time-variant tsunami hazard curves based on Monte Carlo simulation. A life cycle-based stochastic insurance claim model associated with the cumulative loss of building assets is developed based on a non-stationary compound renewal process. Finally, a sample average approximation method is leveraged to estimate the optimum basic insurance premium rate by maximizing the insurer’s profit under a cost-constrained insurance purchase decision of homeowners. As a case study, the proposed framework is applied to multiple municipalities situated in the tsunami-prone region of Kochi Prefecture, Japan. Sea-level rise substantially decreases the maximum profits of tsunami insurers and increases the premium rate and ruin probability.
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Abbreviations
- A :
-
Unit area of the insured asset
- a 0 :
-
Slope parameters associated with the linear relationship between the penetration and premium rates
- b 0 :
-
Intercept parameters associated with the linear relationship between the penetration and premium rates
- BPT:
-
Brownian passage time
- C A :
-
Replacement cost per unit area
- C m :
-
Claim amount
- CMIP5:
-
Coupled model intercomparison project phase 5
- C P :
-
Premium rate
- Ĉ p :
-
Optimum premium rate
- D f :
-
Slip dislocation
- ds q :
-
Damage state of building jb(st)
- E [∙]:
-
Expectation value or first moment
- ES :
-
Emission scenario
- GCM:
-
Global circulation model
- g DR :
-
Discount factor applied to convert the future value of Cm into a present value
- GL :
-
Glacier sea-level rise at location θ and time t
- H k :
-
Tsunami intensity evaluated at grid k
- I P :
-
Revenue from premium income generated from the participation of policyholder
- IS :
-
Ice sheet sea-level rise at location θ and time t
- jb :
-
Building number
- L :
-
Total insurance claim made by individual building from the last tsunami occurrence until the analyzed time of interest
- MCS:
-
Monte Carlo simulation
- N MCS :
-
Total Monte Carlo simulation trial numbers
- NS-SLR:
-
Non-stationary sea-level rise
- PDF:
-
Probability density function
- P R :
-
Penetration rate
- R :
-
Loss ratio of structure as a function of damage state
- r :
-
Discount rate
- RCP:
-
Representative concentration pathway
- SAA:
-
Stochastic average approximation
- SD :
-
Sterodynamic sea-level rise at location θ and time t
- SLR:
-
Sea-level rise
- st :
-
Building structural type
- t D :
-
Analyzed time of interest
- T n :
-
Arrival time of the n-th tsunami event
- W n :
-
Interarrival time between the tsunami event
- Y :
-
Total revenue from premiums generated by the participation of the policyholder from the last tsunami occurrence until the analyzed time of interest
- Z :
-
Total insurance claim for individual buildings at a particular tsunami arrival time
- α :
-
Aperiodicity of the tsunami event
- δ (∙):
-
Kronecker delta function
- θ :
-
Coordinate location over the ocean
- λ :
-
Mean recurrence rate of the tsunami
- μ :
-
Tsunami fault rigidity
- ν :
-
Statistical parameter of building’s fragility curve associated with the mean of the lognormal distribution
- σ :
-
Statistical parameter of building’s fragility curve associated with the standard deviation of the lognormal distribution
- χ 1 :
-
Set of random variables associated with hazard assessment
- χ 2 :
-
Set of random variables associated with vulnerability assessment
- Ψ:
-
Total sea-level rise
- ΩI , G :
-
The joint domain of integration for regional ice-sheet SLR and regional glacier SLR
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This work was supported by the JSPS KAKENHI (grant number: 23H00217) and JST SPRING (grant number: JPMJSP2128).
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All authors contributed to the study conception and design. Tsunami propagation analysis program was developed by SK and executed by AKA and HS. Material preparation, data collection and analysis were performed by AKA, HS, and MA. Supervision was provided by MA and DMF. The first draft of the manuscript was written by AKA and all authors commented on previous versions of the manuscript. All authors read and approved the final manuscript.
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Alhamid, A.K., Akiyama, M., Koshimura, S. et al. Tsunami insurance portfolio optimization for coastal residential buildings under non-stationary sea level rise effects based on sample average approximation. Stoch Environ Res Risk Assess 38, 817–841 (2024). https://doi.org/10.1007/s00477-023-02602-1
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DOI: https://doi.org/10.1007/s00477-023-02602-1