5th International Disaster and Risk Conference IDRC 2014 Integrative Risk Management - The role of science, technology & practice 24-28 August 2014 in Davos, Switzerland

1. IIEES
Global Risk Forum, IDRC 2014
Davos, Switzerland
24-28 August 2014
Earthquake Insurance in Iran
Mohsen Ghafory-Ashtiany
Professor: International Institute of Earthquake Engineering and Seismology
Affiliated Faculty: Disaster Management Research Institute of Shakhes Pajooh
President: Iranian Earthquake Engineering Association
Chairman: Strong Ground Motion, Hazard and Risk Commission of IASPEI
Kiarash Naser-Asadi
Associate Prof. of Zanjan University
SP Insurance Risk Management Institute

2. IIEES
Insurance in Iran
• Low Insurance penetration rate: 2.1% in 2011
• 69% of Insurance Income and 81% of paid losses belong to
Automobile and Health Insurance.

3. IIEES
• Due to low penetration rate of Insurance in Iran, in practice the
risk transfer process from insurance has moved to the
responsibility of the Government.
• Government had and are being acting as “Free Insurer” of the
those who failed to follow the building codes and construction
regulation and those who impose risk to the society.
• The Municipalities and construction authorities by not full
enforcement of the codes have accepted the Government to be
the “free insurer” of the building code violators.
• These facts have caused that people do not show interest on
earthquake insurance and insure their properties.
Disaster Insurance in Iran

4. IIEES
Event Date M
Human Loss
Economic Loss
MRials
Reconstruction
Cost, MRilas
Insurance
Share (%)
Death Injured
Manjil June 90 7.1 14300 29,654 757 1250 0.04
Bojnoord Feb. 97 6.1 90 260 173 269 0.5
Ardebil March 97 5.5 980 2600 255 368 0.6
Ghaen-
Birjand
May 97 7.3 1567 3500 492 466 0.4
Avaj July 2002 6.2 230 1466 627 745 1.9
Bam Dec 2003 6.5 31828 17500 43,000 300,000 1.3
Neka Flood July 99 - 62 351 352 461 1.27
Ahar EQ. Aug 2012 6.3 870 1200 0.9
Human and Economic Losses and share of Insurance

5. IIEES
Type Building Typology
Level of Earthquake Hazard
1 2 3 4 5
1 Adobe and Traditional 1.0 1.1 1.2 1.5 1.8
2 Confined Masonry 0.8 0.9 1.0 1.4 1.6
3 Pre-code Steel Structure 0.6 0.7 0.8 1.1 1.4
4 Pre-code Reinforced Concrete 0.4 0.5 0.6 0.8 1.0
5
Code Based Buildings Design
and Construction (Post 1991)
0.2 0.3 0.4 0.6 0.8
Iran Earthquake Insurance Index for Buildings
Iran Central Insurance Agency, Ashtiany 1991

6. IIEESIIEES
5. Development of an effective system for financial recovery and compensation
through insurance, financial incentives, and ....
6. Reducing the risk of future developments of urban and rural area and
increasing the safety level..... by full implementation of building codes and
enforcement of insurance and ...
7. Substantial risk reduction of existing structures with the main objective of
saving human life, especially the schools, hospitals, public buildings, lifelines
and infrastructures; as well as providing special loan and using insurance
system as incentive for the strengthening of the private buildings.

7. IIEES
Post Strategy Actions:
 Building the insurance culture
 Improve and update the existing earthquake insurance rate
and zoning
 Expansion of the use of risk modeling for Industry and
important structures and Infrastructures, instead of fixed
rate or black box rating.
 Providing Disaster Insurance for all home owners.
 Mandatory Insurance for building construction with bank
financing.

8. IIEES
• Evaluation of the mean and variance of annual
loss of common buildings in Iran and use the
results to define the base for the earthquake
insurance premium index
• Other factors should be calculated based on
the company’s interest and policy

9. IIEES
Seismic Hazard Zonation Based on the Maximum
PGA of each sub-province

10. IIEES
ProvinceTotalNo. of Urban% UrbanNo. of Rural% Rural
‫مرکزی‬34499724515671.069984328.94
‫گیالن‬61659334505855.9627153444.04
‫مازندران‬74008940147654.2533861345.75
‫شرقی‬ ‫آدربایجان‬79234355032569.4624202130.54
‫غربی‬ ‫آذربایجان‬57807737654865.1420152734.86
‫کرمانشاه‬38947527155469.7211792230.28
‫خوزستان‬75444355199573.1720244926.83
‫فارس‬88886556706363.8032180136.20
‫کرمان‬51765231629161.1020135938.90
‫رضوی‬ ‫خراسان‬129633190424969.7539208030.25
‫اصفهان‬111891194068584.0717822315.93
‫بلوچستان‬ ‫و‬ ‫سیستان‬37131517892348.1919239151.81
‫کردستان‬30935818740260.5812195639.42
‫همدان‬36947222962662.1513984537.85
‫بختیاری‬ ‫چهارمحال‬1675889309555.557449444.45
‫لرستان‬32270721062265.2711208434.73
‫ایالم‬991586398364.533517435.47
‫بویراحمد‬ ‫و‬ ‫کهگلیویه‬1152655593648.535933051.47
‫بوشهر‬17200211734668.225465631.78
‫زنجان‬20142911899359.078243640.93
‫سمنان‬14619110994075.203625324.80
‫یزد‬25113120149080.234964319.77
‫هرمزگان‬26620513614351.1413006148.86
‫تهران‬3605089334316192.732619297.27
‫اردبیل‬25391215416560.729974639.28
‫قم‬25292523791194.06150145.94
‫قزوین‬26986519041470.567944729.44
‫گلستان‬33558317703752.7615854747.25
‫شمالی‬ ‫خراسان‬1693748479750.068457849.94
‫جنوبی‬ ‫خراسان‬1435817049349.107308650.90
Total158599261143187772442804228
Urban and Rural Building Distribution, 2011

11. IIEES VulnerabilityAgeArea
ProvinceSafeVulnerable6565-7980-85< 100m2> 100m2
‫مرکزی‬2904131595611497216875361270211193133804
‫گیالن‬77261539332194270295631126695480716135877
‫مازندران‬105821634268231616346466162011493467246622
‫شرقی‬ ‫آدربایجان‬89434702909270418373270148657479638312705
‫غربی‬ ‫آذربایجان‬38954539123145321309155123605329649248428
‫کرمانشاه‬2751236196312256019694469973240426149049
‫خوزستان‬47351707092221490387029145922391666362777
‫فارس‬80553808312286397428641173826351529537336
‫کرمان‬63890453762149893241133126624286059231593
‫رضوی‬ ‫خراسان‬1109201185411386697638504271127868862427469
‫اصفهان‬159741959170377278509732231900436145682766
‫بلوچستان‬ ‫و‬ ‫سیستان‬123743589417789622179271627253672117643
‫کردستان‬217192876391000461498205949622443684922
‫همدان‬2687734259513278917026366421219070150402
‫بختیاری‬ ‫چهارمحال‬1792714966150852819653477256536111052
‫لرستان‬277032950049445015994568313167686155021
‫ایالم‬7123920351767256993244954564353515
‫بویراحمد‬ ‫و‬ ‫کهگلیویه‬133071019582742259899279425500160264
‫بوشهر‬225001495024436581373462689307278930
‫زنجان‬1698618444371265886924147113200369426
‫سمنان‬180221281695162266327282457381172380
‫یزد‬6833244298946091031935333584635166496
‫هرمزگان‬19297246908847061312005030118104985156
‫تهران‬7957172809372104936116584158973142633101971988
‫اردبیل‬31603222309710601248195802716589088022
‫قم‬18743234182795421290834430516587487051
‫قزوین‬48924220941740321320746375819671173154
‫گلستان‬296193059649627316415075163223396112187
‫شمالی‬ ‫خراسان‬954915982558105827042856211859850776
‫جنوبی‬ ‫خراسان‬67441368375727665585207218286060721
Total19820451387788148342557623550340214697423946117532
Building Taxonomy based on Vulnerability, Age and Area; 2011

12. IIEES
Number of StoriesBuilding YearTaxonomyNo
1-3
Before 1991
Steel
1
4-72
>83
1-3
1991-2003
4
4-75
>86
1-3
After 2003
7
4-78
>89
1-3
Before 1991
Concrete
10
4-711
>812
1-3
1991-2003
13
4-714
>815
1-3
After 2003
16
4-717
>818
1-3
AllSemi-steel
19
4-720
>821
AllBefore 1991
Confined masonry
22
All1991-200323
AllAfter 200324
1 and 2
AllUnreinforced masonry and adobe
25
>326
AllAllWooden27
AllBefore 1991
Light weight steel
28
All1991-200329
AllAfter 200330

13. IIEES
Masonry
Adobe 1.7%
Unreinforced
<33%
Reinforced
Steel
Semi steel Structure 41%
Moment Frame
23.7%
Steel Braced Frame
Frame with Concrete Shear Wall
Moment Frame with Steel Bracing
Moment Frame with Concrete Shear Wall
Reinforced
Concrete
Moment Frame
0.6%Moment Frame with Concrete Shear Wall
Concrete Bearing Wall
Density of Construction
Mashhad Building Taxonomy

14. IIEES
Fragility functions
• Fragility functions are adopted from existing
sources for all buildings including:
– Mansouri - Ashtinay (2007)
– Ashtiany-Zereshki (2010)
– Moghadam, Nateghi, and others
– Tavakoli (1998)
– JICA Tehran Project
– HAZUS

15. IIEES
Mean Annual Loss of Steel Structures
Type 3: >8 stories
Before 1991
Type 6: >8 stories
1991-2003
Type 9: >8 stories
After 2003

16. IIEES
Mean Annual Loss of RC Structures
Type 12: >8 stories
Before 1991
Type 15: >8 stories
1991-2003
Type 18: >8 stories
After 2003

17. IIEES
Hazard zone
Number of storyBuilding yearTaxonomyNo
54321
24222017151-3
Before 1991
Steel
1
27252320174-72
2927252119>83
151110971-3
1991-2003
4
13109864-75
1411.510.597>86
654321-3
After 2003
7
764.53.534-78
87654>89
23211916141-3
Before 1991
Concrete
10
25232118154-711
2725232017>812
161312118.51-3
1991-2003
13
129.58.57.56.54-714
1310.59.58.57>815
6.55.54.53.52.51-3
After 2003
16
7.56.55434-717
8.57.56.054.5>818
25232118161-2
AllSemi-steel
19
29262420183-520
2119171412AllBefore 1991
Confined masonry
21
171412108All1991-200322
1210975AllAfter 200323
35322522181 and 2All
UR masonry
and Adobe
24
Wood 65432AllAll25
Insurance Risk Index for Common Buildings in Iran

18. IIEES

19. IIEES
Hazard
Exposure
Vulnerability
Risk in Billion Rials
ProbabilityofLossExceedance
Mean
Intensity
MeanDamageRatio
(%)
Risk
(Economic Loss)

20. IIEES
1. To recover limited economic loss on the Residential and Commercial
Buildings due to Natural Disasters (Earthquake, Flood, Tornado, Thunder,
Snowfall, Liquefaction and Tsunami, etc), all buildings should have the
Basic Disaster Insurance, effectively from March 2015.
2. The coverage limit for Basic Disaster Insurance shall be established based
on the hazard and vulnerability of buildings, defined by Central Insurance
Authority in coordination with the Disaster Management Organization
(DMO), Ministry of Housing and Urban Development.
3. The insurer for the Basic Disaster Insurance is the Iran Insurance
Company.
4. Iran Insurance Company should establish special account for this collected
premium from all building owners.
Iran Mandatory Basic Disaster Insurance

21. IIEES
4. Basic monthly premium in the first year shall be 10,000Rs in villages,
15,000Rs in small towns and 20,000Rs in large cities. This amount will
charged on the electric bill. The premium shall increase within next 10
years in way that the building owners share of the actual premium
become 100% and DMO become 0%.
5. Central Insurance Organization shall provide Reinsurance coverage. DMO
shall allocate 15% of its annual budget for this program.
6. From the effective day of this law, DMO will not be responsible for the
reconstruction of the damaged buildings due to disasters.
7. Private Insurance co. shall provide the complementary insurance coverage
for those who requires more than basic coverage.
8. 1% of the collected premium shall be allocated for public awareness
program and promotion of insurance culture.
Iran Mandatory Basic Disaster Insurance

22. IIEES
Parliament concern has required more information and
justification on the:
 Financial benefits to households,
 Catrisk policy terms based on risk pricing and
homeowner affordability,
 Protecting the Insurance company;
 Improving insurance penetration,
 Risk-based premium rate,
 etc
Iran Natural Disaster Insurance Pool, INDIP

23. IIEES
Concluding Remarks:
 Earthquake Risk Reduction has almost become an integral part of
the development process; and insurance is an integral part of the
Iran DRR Strategy
 Fare, just, reliable and affordable insurance rating and policy is the
key factor in expansion of insurance coverage and providing
economic Resilience.
 Enhancing disaster insurance culture through education both at
the level of insurance industry, financial and public sectors.
 Implementation of mandatory Disaster Insurance program can be
resulted to the promotion of wider application of disaster
insurance in other sectors.
 Allowing market-driven rating will push the insurance company to
Catastrophe Risk Modeling rather depending on fixed rate basis.