Sensitivity analysis of demand surge
The results of stress tests quantify the impact of varying demand surge functions on average annual loss (AAL) and exceedance probability losses.
Although there is uncertainty in modeling demand surge, stress tests performed on the demand surge function do not produce radically different results. Verisk conducted a series of tests to quantify the effects of altering the curves by various amounts. This was done by increasing or decreasing the curves one at a time by the factors indicated in the table below, while holding the curves for the other coverages constant. The impact of the altered functions on estimated industry average annual loss (AAL) and 1% probability of exceedance losses (100-year return period) are also summarized in the table.
|
Coverage |
Stress |
% Change in AAL |
% Change in 1% loss |
% Change in 0.4% loss |
|---|---|---|---|---|
|
A/B (Buildings/Other Structures) |
Increase 25% |
2.7 |
4.8 |
5.1 |
|
A/B (Buildings/Other Structures) |
Decrease 25% |
-2.4 |
-3.8 |
-4.1 |
|
C (Contents) |
Increase 5% |
-0.5 |
0.5 |
0.7 |
|
C (Contents) |
Increase 10% |
0.9 |
1.1 |
1.5 |
|
D (Time Element) |
Square Root (A/B Curve) |
-0.8 |
-1.4 |
-2.3 |
|
D (Time Element) |
Equal to A/B Curve |
-0.5 |
0.9 |
-1.4 |
|
D (Time Element) |
(A/B Curve) Cubed |
1.2 |
2.1 |
3.7 |