Learning from Earthquakes Loss Adjusting in Italy

1. Carlo Tozzi Spadoni, Senior Partner Sinaia, 21st May 2013 Learning from Earthquakes Loss Adjusting in Italy

2. SUMMARY • Earthquakes: different occurrences, common patterns; • Loss Prevention: Technical Norms are useful, but not enough; • Loss Adjusters: those to rely upon when it’s too late for others to step in.

3. 1. Earthquakes: different occurrences, common patterns A hot issue: the worst 20 earthquakes in the XX and XXI century were all in the Asia-Pacific, with 4 out of 10 in the last 7 years out of 111. 1. Valdivia, Chile - magnitude 9,5 - 22 May 1960 2. Straight of Prince William, Alaska - magnitude 9,2 - 28 March 1964 3. Sumatra, Indonesia - magnitude 9,1 - 26 December 2004 4. Kamchatka, Russia - magnitude 9,0 - 4 November 1952 5. Sendai, Japan - magnitude 9,0 - 11 March 2011 6. The Ecuador Coast - magnitude 8,8 - 31 January 1906 7. Concepción, Chile - magnitude 8,8 - 27 February 2010 8. Rat Island, Alaska - magnitude 8,7 - 4 Feburary 1965 9. Sumatra, Indonesia - magnitude 8,7 - 28 March 2005 10. Haiyuan, China - magnitude 8,6 - 16 December 1920 And a «Club-Med» issue as well: Italy, the Balkans and Turkey have all been affected by devastating Earthquakes in recent years and are exposed to such a risk. In Italy, we’ve had two major events (L’Aquila in 2009 and Emilia in 2012), from which a few lessonsa can be drawn.

4. 1. Earthquakes: different occurrences, common patterns Every day has its quake: Every day, small seisms are recorded, but fortunately only a few release an energy and hit a populated area that cause significant damages (Causalties and Property).

5. 1. Earthquakes: different occurrences, common patterns Diagram of an Earthquake • The impact of an Earthquake is a function • It = f (e, t, m, o, z, p,…) of various factors, including: • the energy released - e • the different types (bradyseism, seaquake, tsunamis, cluster shocks, etc.) - t • the type of movement (shake, wave) - m • the type of wave (compression, cutting, superficial) - o • the area struck (population, housing density, infrastructures, social organisations, etc.) - z • the protection measures adopted (technical, civil defence, financial, etc.) - p • … Each quake is a different event impacting a different area and thus causing different losses – both in terms of casualties and/or material / financial damages.

6. 1. Earthquakes: different occurrences, common patterns Not only the type and structure of the buildings involved, but also the energy of the Earthquake varies significantly between , for instance, Japan (above) and Italy (L’Aquila) below.

7. 1. Earthquakes: different occurrences, common patterns Construction standards most frequently used in modern industrial buildings are prefabricated reinforced concrete elements. Most recent trends include flat roofs to fully exploit the height which, over the years, was considerably increased. Common Patterns. These structures do not always react well, with more or less relevant detachments of wall panels, roof parts and loss of connections among the prefabricated elements.

8. 1. Earthquakes: different occurrences, common patterns • The main reasons for this can be traced down to the following: • The height of pillars generates a remar-kable cantilever which in turn, during oscil-lation, stresses connections among pre-fabricated parts; • The considerable mass of roof panels, which adds further stress;

9. 1. Earthquakes: different occurrences, common patterns 3. Side wall panels connections are often relatively weak; 4. Structures do not absorb well normal deformations, thus stressing the connections among elements.

10. 2. Loss Prevention: Technical Norms are useful, but not enough Technical Norms Loss Prevention To protect human lives; To limit damages; To preserve functionality of structures essential for Civil Defence. Purpose To limit MPL/MFL combined for material damages and BI; To limit Third Party damages (also human lives)/Environment. Area of application Buildings; Structures different from buildings (plants, etc.), if not otherwise normed Buildings (Structures and non); Machinery (Structures and non); Stock; BI; Contingent BI; Third Party Liability/Accident . Compulsory implementation 100% for new buildings, where applicable; Partially, on existing entities; Limited compliance to the Law (e.g.: L’Aquila Hospital, Students Hostel, etc.). Even solo to industrial risks, not that many are insured against earthquakes; Furthermore, actual Loss Prevention is only implemented on sites with high MPL/MFL.

11. 2. Loss Prevention: Technical Norms are useful, but not enough Same shock, different loss: a well designed/built risk will resist to most quakes, while others will not. Norms are therefore useful …

12. 2. Loss Prevention: Technical Norms are useful, but not enough … but often not enough: what statically survives the main-shock, may no longer be able to guarantee safety during after-shocks, thus causing relevant consequential and/or BI damages even with relatively limited property damage.

13. 2. Loss Prevention: Technical Norms are useful, but not enough Furthermore, a series of non-structural civil and plant facilities are not subject to the same verifications foreseen for structures: this often causes a prolonged site unavailability for more or less long periods of time, thus adding to previously outlined problems.

14. 2. Loss Prevention: Technical Norms are useful, but not enough Plant engineering does not generally have the same regulations designed for anti seismic structures: often, following an earthquake, gas & water pipes leak thus often triggering fire. Electrical and telecom facilities also have similar problems…

15. 2. Loss Prevention: Technical Norms are useful, but not enough

16. 2. Loss Prevention: Technical Norms are useful, but not enough

17. 3. Loss Adjusters: those to rely upon when it’s too late for others to step in Technical/Engineering Know-How \ Assessment/Financial Legal/Contractual Know-How Others General & Strict Liability Civil/Construction Property: Buildings, Machinery & Stock Mechanical Electrical Insurance Contracts Business Interruption Management & Problem Solving Chemistry +Linguisticand multiculturalskills & a log of previousvaluableexperience in a growinglyinternational and complex business environment

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