The UOC helps develop a computational solution enabling faster recoveries in areas affected by earthquakes

Universitat Oberta de Catalunya (UOC) has collaborated with Guy Carpenter & Company, LLC, a leading global risk and reinsurance specialist, to develop a financial and computational solution that increases earthquake insurance coverage and enables faster social and economic recoveries in the areas affected. Guy Carpenter has developed a new platform, GC QuakeCube^SM, with the support of the UOC's Internet Computing & Systems Optimization (ICSO) research group. Two of the group's researchers, Chris Bayliss and Alejandro Estrada, helped to develop optimization algorithms that enable more efficient risk coverage.

Effects of earthquakes

The moment magnitude scale measures the amount of energy released in an earthquake. According to the U.S. Geological Survey's Earthquake Hazards Program, more than 16,000 earthquakes measuring over 5 on this scale have occurred worldwide in the last decade, causing over 260,000 deaths. These figures underline the scale of earthquake risk and highlight the need for emergency protocols that are more responsive, in order to minimize damage. "The technology developed by Guy Carpenter and UOC addresses this need by enabling financial payments for recovery based on the measured earthquake's magnitude and the location of its hypocenter (approximate origin of energy dispersion), and tightly links them to expected property and disruption damages", highlighted ICSO's coordinator, Àngel A. Juan.

There have been many recent events that offer examples of the platform's potential: in June of this year, a magnitude 6.3 earthquake with its epicenter near Costa Rica's border with Panama caused severe damage to infrastructure; in 2018, a magnitude 7.5 earthquake in Indonesia left more than 2,200 dead and thousands of people missing; and in 2011, two earthquakes – one of magnitude 4.4, followed by a second of magnitude 5.1 – shook the town of Lorca in the province of Murcia in Spain, causing nine deaths and over 300 injuries. An initial assessment by the Insurance Compensation Consortium (CCS), a public agency in Spain's Ministry of Economics and Business, set compensation at €65–70 million. In total, more than 28,000 compensation applications were processed with a cost of over €495 million.

"Because of the need to carry out detailed appraisals to properly assess damage, it can take considerable lengths of time for traditional insurance products to compensate the organizations and the people affected by earthquakes", added Juan, who is also a full professor at the UOC. Such delays increase costs and slow down recovery, which can take months or even years. Guillermo Franco, Managing Director and Global Head of Catastrophe Risk Research at Guy Carpenter, mentioned that, thanks to parametric solutions such as GC QuakeCube, "organizations and the people affected can access compensation funds a few days after the event, a key contribution to accelerating the social and economic recovery of the area impacted."

Guy Carpenter & Company, LLC is a leading global risk and reinsurance specialist with more than 3,100 professionals in over 60 offices around the world. Guy Carpenter delivers a powerful combination of broking expertise, trusted strategic advisory services and industry-leading analytics to help clients adapt to emerging opportunities and achieve profitable growth. Guy Carpenter is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the world's leading professional services firm in the areas of risk, strategy and people. The company's 76,000 colleagues advise clients in over 130 countries. With annualized revenue approaching $17 billion, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading companies including Marsh, Mercer and Oliver Wyman.