Navigating earthquake risk for a Pacific port

The challenge

A large port in the Pacific insures 100% of its site value for earthquakes. Due to changes in the insurance market, insurers had placed a sub-limit on earthquakes, which was inconsistent with the insurance strategy of the port.

The solution

Marsh’s Advisory Property Risk Solutions undertook a comprehensive earthquake analysis for the port. Our natural catastrophe specialists assessed the client’s earthquake risk and evaluated the adequacy of current insurance arrangements. We also completed an earthquake loss modelling analysis of the port to provide evidence to support negotiations with insurers in respect to the required level of insurance.

The approach involved five phases:

1. Due diligence and data collection: Engaging the site’s Geographic Information System (GIS) team to gather detailed asset schedules, valuations and GIS data for all assets including berths, and services such as roads, electrical, water etc.
2. Detailed site survey: Completing a site survey to collect detailed quality risk engineering data to inform earthquake loss models, with a specific focus on berths and their construction characteristics.
3. Modelling: Collating site data and GIS layers to develop a detailed earthquake modelling input file for modelling.
4. Supporting analysis: Completing a liquefaction risk analysis.
5. Reporting: Supporting negotiations with key stakeholders through objective analysis of the earthquake risk.

The results

Through detailed analysis we were able to demonstrate that the modelled losses were significantly lower than the total declared values. By differentiating the risk this way – through risk-engineering analysis of the risk exposure and detailed loss-modelling results – Marsh was able to help the port secure 100% cover on earthquake risk at insurance renewal.