Parametric Catastrophe Bonds for Tsunamis: CAT-in-a-Box Trigger and Intensity-Based Index Trigger Methods

Abstract

This study presents a calibration of CAT-in-a-Box and intensity-based index trigger mechanisms for parametric tsunami catastrophe bonds. Trigger conditions for the former are based on fundamental event characteristics, such as earthquake location and magnitude, whereas those for the latter utilize tsunami wave height measurements at a series of observation stations. These solutions are illustrated for a building portfolio in Iwanuma City in Miyagi Prefecture, Japan, by considering a new seafloor observation network S-net off the Tohoku-Hokkaido coast of Japan. Performances of the two types of parametric solutions are quantitatively evaluated and compared with each other to discuss their advantages and disadvantages.

Multi-hazard parametric catastrophe bond trigger design for subduction earthquakes and tsunamis

“…These are consistent with dominant contributions of the tsunami loss to the total multi-hazard loss at these large trigger levels. It is also noteworthy that these reduced trigger errors are consistent with the results for the tsunami CAT bond trigger design by Goda et al (2019).…”

“…A case-study example is focused upon wooden buildings in Miyagi Prefecture, Japan. Because details of the shaking-tsunami catastrophe model and the trigger design methods are explained in Goda and De Risi (2018) and Goda et al (2019), respectively, descriptions of these model and methods are kept concise in this article. Interested readers can find full details in the above-mentioned articles.…”

“…This study presents the trigger design of multi-hazard parametric CAT bonds for shaking-tsunami loss via logistic regression (Agresti, 2007). The work on tsunami CAT bond triggers by Goda et al (2019) is extended to multi-hazard CAT bonds by adopting peak ground velocity (PGV) as trigger parameter for shaking damage (note: for tsunami, the maximum wave height, WH max , at offshore observation stations is considered). In this study, trigger performances of parametric CAT bonds are compared by considering scenario-based and station-intensity-based approaches.…”

Design of parametric risk transfer solutions for volcanic eruptions: an application to Japanese volcanoes

“…Second-generation indices can be, in general, considered to be superior to firstgeneration triggers owing to a potentially better correlation between the distributed parameters and resulting losses, although the performance ultimately depends on many design considerations. In the case of tsunami losses, for instance, Goda et al (2019) found the forecasting errors in secondgeneration indices were slightly inferior to those for firstgeneration triggers. Progressively, as sensors become more ubiquitous and precise, and as technology facilitates communication of measurements, parametric insurance mechanisms are becoming more widespread.…”

“…3, we discuss the conceptualization and the mathematical design of a plausible parametric risk transfer tool leveraging physical descriptors of the eruptive events that are both simulated in the risk model as well as reported by public entities during the course of an actual event. The work draws from efforts carried out in the development of parametric triggers for other perils, fundamentally earthquake (Franco, 2010(Franco, , 2013Goda, 2013Goda, , 2014Pucciano et al, 2017;Franco et al, 2018) and tsunami (Goda et al, 2019). Section 4 applies the framework presented to an application case study in Japan where a regional (or national) entity may desire to adopt this type of risk transfer mechanism to help offset costs associated with ash fall generated by an eruption of Mt Fuji.…”