6. Individuals Involved and Their Responsibilities
6.1 Overview
6.2 User’s Role and Responsibilities
6.3 Provider’s Role and Responsibilities
6.4 Minimum Qualifications of the Provider
6.5 Other Parties and Their Roles and Responsibilities
6.5.1 Catastrophe Risk Model Provider
6.5.2 Insurer or Insurance Broker
6.5.3 Valuation Consultant
6.5.4 Rating Agency
6. Individuals Involved and Their Responsibilities
6.1 Overview
The User identifies their objectives for the seismic risk assessment of a real estate portfolio and then selects and engages the Provider to perform the portfolio seismic risk assessment (Portfolio SRA), to meet the User’s needs. It is expected that to perform the Portfolio SRA, the Provider will utilize seismic risk analysis software (a “model”), which may be supplied by a third party (“Catastrophe Risk Model Provider”).
The User may be the property owner or their representative, a real estate lender, or some other entity.
The User may request Portfolio SRAs either periodically or as needed for seismic risk management and reporting — to report the level of risk to a purchaser or lender, to inform earthquake insurance purchase decisions, to help manage risk, or to guide recovery planning and enhance corporate resilience. Alternatively, the User may request a Portfolio SRA in support of a specific transaction.
Providers of Portfolio SRAs may be risk consultants or insurance brokers, performing Portfolio SRAs using readily observable characteristics of the buildings, such as age, height, location and occupancy. Such Portfolio SRAs make efficient use of available data and may be sufficient for certain purposes, but generally are not under the direction of engineering professionals (civil and structural engineers, geotechnical engineers, etc.). The vulnerability data on which they are based but is often limited or unverified and the results therefore may have high uncertainty, although it may include past reports from engineers. In this standard, these are referred to as “Desktop” Portfolio SRAs.
One purpose of this standard is to indicate where and how additional information and investigation can improve the Portfolio SRA results, by improving accuracy and reducing uncertainty, and to describe the role of the Professional Engineer in such studies. Seismic risk assessments for which the vulnerability modeling is under the responsible charge of a Professional Engineer (Civil or Structural) are referred to as “Engineered” Portfolio SRAs in this standard, can provide an improved basis for making earthquake risk decisions and may also indicate other risk mitigation options. An “Engineered” Portfolio SRA need not involve detailed investigation and improved modeling for all locations – the focus of efforts should be high-value properties and locations with high impact on the overall portfolio.
6.2 User’s Role and Responsibilities
It is the User’s responsibility to furnish the Provider with:
1. Initial specification of the desired scope of work and deliverables, schedule and other terms.
2. A list of the buildings to be included in the Portfolio SRA, their locations and replacement values. If risks to Contents and/or Business Interruption (BI) are to be included, replacement values for Contents and the annual cost of BI should be provided. The asset replacement values to be used in the Portfolio SRA shall be current and accurate.
3. Available information on the buildings including year built, number of stories, occupancy (usage), framing system or materials of construction. In the insurance industry this data is often referred to as COPE for Construction, Occupancy, Protection, Exposure.
4. Other existing information regarding the buildings and site seismic hazards, including reports from previous single site or portfolio seismic risk assessments, and any past earthquake damage and losses.
5. Where relevant based on the finalized scope of services, provide assistance with access to sites, design documents and other information needed for new investigations or for updates of previous investigations for any of the included properties.
Prior to commencement of the Portfolio SRA, the User and Provider should discuss and agree on the final scope of work, the deliverables, schedule and other terms. During the Portfolio SRA project, the User should then interact with the Provider and provide feedback to ensure that the completed Portfolio SRA meets the User’s needs.
6.3 Provider’s Role and Responsibilities
The Provider reviews the documents and data furnished by the User and discusses and agrees on the final scope of work, deliverables, schedule and other terms. For Engineered Portfolio SRAs, the Provider and the User should concur on any additional drawings reviews, site visits or other investigations to be included in the study.
The Provider then performs the Portfolio SRA for the User in accordance with the agreed scope and terms as well as the minimum requirements identified in this standard. The Provider’s organization may perform all components of the assessment, or they may engage other individuals or entities for some components. However the Provider’s organization remains responsible for all components of the services.
There are normally three main components to the Provider’s services:
i. Collect/review/supplement
data on the seismic hazards and vulnerabilities
ii. Analyze the potential losses using a suitable model
iii. Provide a report with Portfolio SRA results
These are further elaborated on:
i. Collect/Review/Supplement Data
Data sources may include:
§ Property data and reports furnished by the User, as noted above.
§ Any single-site seismic risk assessment reports or other reports relevant to the buildings that were previously prepared by the Provider.
§ Other public data sources regarding the site hazards or building vulnerabilities. For example, public websites may contain geotechnical reports or data, or information on building year of construction or past earthquake damage. Street-view or other images may also be available online.
The Provider is responsible for organizing the existing data in a form that is suitable for the model to be used, but may request that the User provide the data in a particular format.
Additional Requirements For Engineered Portfolio SRAs:
The Provider should also review the data for completeness, and identify additional field investigations and/or drawing reviews that may be warranted. These should be discussed and agreed with the User as noted above, and then carried out. Items that warrant further investigation may include:
§ Buildings where the primary lateral force-resisting system or other key seismic features are unknown or unclear, particularly if these buildings are high value and/or in high hazard locations
§ Locations with large Contents or BI values
§ High value locations where secondary hazards such as liquefaction may be a significant contributor to the potential losses
§ Buildings whose insured values appear either unreasonably high or low, based on their attributes (e.g., size)
ii. Analyze the Expected Losses Using a Suitable Model
The Provider should have sufficient knowledge of the model being used to understand how the model works, what input is required, what adjustments can be made, and how to review the results. The Provider should understand how the model addresses:
§ Shaking hazard – what are the data sources?
§ Secondary hazards such as liquefaction, landslide, fault rupture
§ Vulnerability of the buildings, and (where applicable) the contents, as well as downtime for restoration and the resulting Business Interruption
§ ‘Demand Surge’ or ‘Loss Amplification’ (if included)
§ Aggregation of losses and treatment of uncertainty
The typical steps in analyzing the losses are:
a. Prepare
data for use in loss model
b. Run the model
c. Review results
Additional Requirements For Engineered Portfolio SRAs:
The focus of the Provider should be on properties which contribute significantly to high aggregate losses, or which have potential to contribute significantly to such losses. When reviewing the results, the Provider should check the assumptions the model has made about ground conditions (i.e., Site Class), liquefaction and other secondary hazards for each significant site. The Provider should also review loss analysis results on a building-by-building basis for important properties and compare these to single-site SRA results where available. If warranted, further adjustments should then be made to input data and the losses should be re-analyzed.
iii. Provide a report with final results and supporting information (see Chapter 9).
6.4 Minimum Qualifications of the Provider
Providers of Desktop Portfolio SRAs should have a good general understanding of earthquake hazards and building structures and experience with the model selected. They should also have general knowledge of typical building costs and earthquake insurance coverage provisions.
The experience and judgment of the Provider of an Engineered Portfolio SRA are key to improving building data and vulnerability modeling, reducing the uncertainties in results compared to Desktop studies. In addition to the foregoing requirements, Providers of Engineered Portfolio SRAs must be licensed Professional Engineers — Civil or Structural — experienced in single-site seismic risk assessments. They should meet the minimum requirements for Level 1 Field Assessor in ASTM E2026, and be knowledgeable of the model to be used and its hazard data sources and structural and nonstructural vulnerability models.
6.5 Other Parties and Their Roles and Responsibilities
6.5.1 Catastrophe Risk Model Provider
A Catastrophe Risk Model provider develops and maintains a software system (model) for the analysis of earthquake risks to real estate properties, and provides the software, or access to the software, to the Provider for seismic risk analysis of the User’s real estate portfolio.
In some cases, the company which provides the model may also fulfill the entire role of the Provider (per Sections 6.3 and 6.4).
The model Provider should provide technical documentation describing the geologic hazards, seismological basis and ground motion models, building vulnerability models and uncertainty management to allow the service provider to understand and select a model and make effective use of its capabilities to the benefit of the User. Where the seismic ground-shaking hazards are based upon the USGS’ National Seismic Hazard Mapping Project, the model Provider should provide comparison of the shaking hazards from the model to results published by the USGS for the intensity measures considered by the catastrophe model and relevant to the buildings in the portfolio (e.g., PGA or Ss for low-rise construction, or S1 for mid- or high-rise construction). The model Provider should describe methods used to account for the effects of local site conditions (e.g., Site Class) on ground shaking intensity, and (if considered) liquefaction effects. The documentation should describe the features and options of the software, and the limitations of the software.
6.5.2 Insurance Broker – An insurance broker often works with the owner to develop a Statement of Values listing all of the properties in the portfolio (or alternatively the subset of properties in seismically-active areas), assists in estimating the values-at-risk (e.g., replacement values for buildings and/or contents, monthly rents, etc.). The insurance broker may function as User’s representative in the Portfolio SRA. In some cases, the insurance broker may function as the Service Provider or collaborate with the Service Provider in the use of the model. However the Insurance Broker should not serve as both User’s representative and Provider on an Engineered Portfolio SRA.
6.5.3 Valuation Consultant – if needed, a valuation consultant can provide improved exposure data, i.e., replacement values for buildings and (where relevant) for contents. See also the Technical Appendix.
6.5.4 Rating Agency – may provide a rating of a transaction for stock in a real estate investment trust (REIT), or a security issued by a real estate mortgage investment conduit (REMIC), or other financial instrument. The rating may be based in part on the results of the Portfolio SRA and the owner’s earthquake insurance coverage.