Certus Consulting provided a seismic risk assessment of the new San Bernardino County Courthouse, a twelve-story, 396,000 square foot state-of-the-art judicial facility. The proposed structural system for the building included a base isolated foundation intended to dramatically improve seismic performance. Certus evaluated the expected performance of the structure compared to a more conventional, less expensive, framing system. We considered potential damage to the building and disruption to the critical judicial operations that might result following a major earthquake. Certus calculated an estimated 40% return on the additional investment in base isolating the building when considering the improved performance relative to the additional construction costs. This valuable information was used by the State Judicial Council to justify the enhanced structural system.

Certus provide risk assessment for a northern California county that straddles a portion of the active Hayward Fault. The county owns or leases nearly 700 properties and wanted to determine whether its current earthquake insurance portfolio was optimal. Among the insured structures are concrete block buildings, light metal frame structures, a hospital and several new corrections related facilities.

Certus created a risk model based on the Hazards US (HAZUS) software developed by FEMA, customized for the county’s unique portfolio. We reviewed structural drawings for each of the insured properties and identified specific structural characteristics that will affect seismic performance. Based on the analysis, Certus recommended that several buildings be removed from the portfolio; specifically those where the county broker’s less accurate model predicted losses significantly higher than our detailed model. These buildings were 1) contributing a disproportionate penalty to the overall rate the county is being charged and 2) were being insured at an effectively much higher rate than would be appropriate for their risk.

As a result of the analysis, Certus predicted that the county would be able to reduce its premium by 24%, whereas the insurer will relinquish back to the county only about 9% of its annual exposure.

In 2004, the California Administrative Office of the Courts completed a seismic assessment of over 500 buildings scheduled for transfer from County to State jurisdiction. Certus consulted to the AOC to quantify expected building, casualty and business interruption losses for the portfolio. Mr. Reis developed custom loss estimating software to evaluate the portfolio.

Certus used the model to help the AOC structure a collaborative risk pool through which counties would share the seismic risk of the transferred buildings. The model considers existing earthquake coverage and provides detailed risk information to determine each county's contribution. The pool would be structured through a JPA to provide the counties immediate access to and control over funds following an earthquake. The cost of the pool is expected to be considerably lower than risk transfer obtained through traditional insurance methods.

Certus assisted the CEA with an assessment of its loss estimating software. We managed a significant effort to gather and compare the best available analytical and empirical methods for loss estimation, researching available open-source loss modeling methodologies that were applicable to the CEA’s portfolio of single-family homes. This extensive effort resulted in a confident understanding of the current industry state-of-the-art.

Certus developed a hypothetical portfolio of building types, with a range of ages and structural configurations that reflected the CEA’s actual portfolio. We created individually tailored loss estimation models to replicate the algorithms and loss estimating processes in the various open source methodologies. The results from the open-source models were compared to those for the same portfolio run through the software CEA currently uses. We assessed the correlation of the various open-source models to the proprietary model, evaluated trends, and identified possible reasons and rationale for the differences observed.

Certus completed the seismic risk analysis of a large portfolio of townhouses the Bay Area. The Homeowners' Association was concerned at the price of earthquake insurance for their nearly 300 units that are situated only a few miles from the San Andreas Fault. Certus gathered construction and design information for the buildings and performed a structural analysis to determine whether or not they conformed to nationally accepted seismic performance goals.

Certus also modeled the buildings and estimated losses in a range of possible earthquake scenarios. Certus reviewed the Association's current insurance policy, and provided advice on how it could be restructured to more efficiently transfer the properties' risks. The Association used Certus' information to renegotiate the terms of its upcoming policy renewal.

Certus performed a risk analysis of this seventy year-old structure, slated for replacement in five to ten years. Projected costs of $6 to $14 million to seismically retrofit the building before then were considered too expensive given the building's short future life. We estimated the likelihood of life threatening earthquake damage and concluded the risk over the next ten years was similar to that for a retrofitted building over a fifty year lifetime. Our analysis helped the University demonstrate that replacing the building in ten years or less was an appropriate risk management strategy.

Certus performed a risk analysis of this 30-year old wood, masonry, steel and concrete building in the heart of the Stanford Campus. The building suffers from extensive weather damage and many seismic deficiencies. The University asked Certus to evaluate two disruptive and costly mitigation options: a full seismic and cladding upgrade or immediate replacement. We developed an alternative strategy that recommended interim waterproofing repairs and replacement in a five to seven year timeframe. This solution allowed the University to keep both its risks and capital budgeting well managed.

Certus Consulting is working with its strategic partner, Hinman Consulting Engineers to provide building owners with comprehensive risk management services related to blast effects caused by terrorism. HCE is a world-recognized expert in blast modeling and mitigation engineering.

By integrating engineering and financial analyses, we will assist risk managers and building owners in constructing a holistic, systematic strategy of risk mitigation, transfer and retention. This process expresses risk in terms of return on investment that allows it to be directly compared with other capital expenditures, enabling a rational response to an irrational threat.

Certus Consulting has developed a new form of alternative risk transfer called Collaborative Risk Sharing (CRS). CRS combines the best qualities of traditional insurance and common ART tools into a highly cost effective and reliable risk transfer product. CRS’s core element is the collaborative, a relatively small group of “member” companies with geographically diverse portfolios who face potentially heavy losses from large, rare, natural or man-made disasters. Advantages of CRS include

• A contractual, not premium based risk transfer mechanism
• More predictable and substantially lower costs than traditional insurance
• A simple and objective loss adjustment process
• Nearly immediate payment of claims
• Avoidance of insolvency risk faced by traditional insurers

Certus Consulting is currently assisting high-tech, institutional and other companies with business continuity planning. We have established procedures for rapid structural engineering response after major natural or man-made disasters. Engineering services include: assessing existing building conditions, identifying the severity of damage and designing emergency repairs. Through these efforts we hope to help businesses resume operations quickly and reduce lost revenues after a damaging earthquake.