Hurricane Risk of Multi-Family Dwellings in Puerto Rico

Abstract

Hurricanes in the North Atlantic Basin cause widespread damage to the Caribbean islands on a regular basis. Catastrophe risk models are used by insurance and reinsurance companies to estimate the average losses one could expect to buildings and property as a result of natural hazards (e.g., hurricanes, earthquakes, floods, etc.). Catastrophe models contain three major components: (1) a set of possible events for each type of hazard that includes geographic footprints of their intensity (e.g., peak ground acceleration, peak 3-second wind gust); (2) a vulnerability component that links the hazard to expected damage, generally composed of a suite of "vulnerability curves" that account for site-specific building characteristics; and (3) a financial module that estimates the expected monetary losses while accounting for any applicable insurance contracts. The event sets are generated using distributions of the physical parameters of the hazard (including radius to maximum winds, peak wind speeds, minimum central pressure and forward speed for hurricanes), primarily gathered from records of historical events. The vulnerability curves are based partly on past insured losses and judgment based on engineering analysis.