U.S. Earthquake Frequency Estimation-Ratemaking for Unusual Events

In our work on ratemaking, financial modeling, catastrophe modeling and planning, actuaries often must estimate the expected frequencies of unusual events. However, actual historical data for unusual events is too sparse to be very useful, so we must look to other sources for help. One example of these rare events is earthquakes. In recent years, the scientific community has performed significant research to better estimate the likelihood of earthquakes throughout the United States. Papers published by that community have presented much information that should be helpful in our quest to use earthquake frequencies in ratemaking, modeling and other actuarial work. This paper will present a basic discussion of scientific measures to estimate earthquake probabilities, a list of useful sources, and a discussion of several issues important to the understanding of earthquake ratemaking.