Reduce or transfer? A framework for combined optimal seismic retrofit and insurance

Structural retrofit (risk reduction) and insurance (risk transfer) can be used to increase an asset's earthquake resilience. This paper describes a framework to select the optimal combination of seismic retrofit and insurance for buildings. A user can choose a suitable retrofit strategy and the technique(s) for its implementation. This is designed “incrementally” to define interventions with increasing “amounts of retrofit”: for example, the addition of an external wall with different stiffness/strength or the column jacketing at specific storeys. The cost of each intervention is calculated, along with the downtime-related costs due to the retrofit work. For each intervention, vulnerability curves are calculated based on pushover analysis combined with the Capacity Spectrum Method. Insurance solutions with different pay out algorithms and annual premiums are considered. For each retrofit/insurance combination, the net present value of the insured and uninsured economic losses within a given time horizon is estimated. The optimal retrofit/insurance combination is the one maximising the Tail Value at Risk of the retrofit/insurance lifecycle cost. This metric depends on the risk-aversion of the householder, which is an input for the algorithm. The framework is demonstrated for an Italian existing RC frame building retrofitted with concrete jacketing, also considering the Italian retrofit incentive (“Sismabonus”)