Parametric earthquake insurance to compensate the monetary loss resulted by production interrupt at industrial units, case study: Parsian gas refinery

Abstract

This study aimed at designing triggering thresholds for parametric insurance mechanisms to transfer the subsequent risk of production interruption-caused by an earthquake-to the insurer. The Parsian gas refinery complex located in Zagros, a seismic-prone area in southern Iran, was investigated as a case study. The whole gas refinery system was divided into separated production paths, and key components were specified in each path. The compatible fragility functions, as well as the recovery functions, were assigned to different components in each production path and were combined with the expected monetary loss related to daily interruption in that path. As a result, a forecast model was obtained as a function of each arbitrary earthquake scenario for the monetary loss of the entire refinery. On the other hand, a synthetic seismic catalog span of 50,000 years was created by taking advantage of a well-known hazard model. The seismic risk function was calculated for the refinery by combining the consequent loss model with the obtained samples of ground motion fields. Insurance triggering threshold parameters were computed in 100- and 1000-year return periods by using an intensity-based approach and minimizing the basis error. Finally, the performance of the existing strong motion acceleration stations was evaluated and more relevant stations that can trigger the loss payment threshold with higher reliability were specified.