Seismic Risk Assessment (PML) Studies

Seismic risks concern building designers, owners, buyers, lenders, and insurers. Often in seismic risk assessment, financial risks must be evaluated for an individual building, without regard to its correlation with risks at other sites. For real estate portfolios, both ‘single-site’ seismic risks and ‘portfolio-wide’ risk impacts should be assessed. Commonly, seismic risk assessments for individual buildings are a part of due-diligence in the property acquisition process.

The uses of single-site seismic risk analysis for properties in seismically active areas are many, such as:



  • Examining prospective financial losses to real estate properties from future earthquakes
  • Assessing building life-safety (i.e., the probability to exceed a collapse level of response)
  • Providing cost-justification for new design beyond minimum levels
  • Providing cost-justification for seismic retrofit of existing buildings
  • Rapid post-earthquake damage evaluation

Required Qualifications

Conducting seismic risk assessment requires expertise in structural engineering, geology, seismology, foundation engineering, risk and statistics. Generally, the lead role in formal seismic risk studies falls to a Civil or Structural Engineer. From a technical standpoint, a person who is not an experienced Civil or Structural Engineer lacks the qualifications to offer conclusions regarding the adequacy of a building’s structural system under gravity or earthquake loads, or compliance with the building code. Such judgments fall within the regulated practice of the Engineering profession under state laws. The Engineer must utilize other professionals as needed to adequately address the particular challenges for the site and building in question, such as surface fault rupture, liquefaction or landslide.

Industry Standards

The American Society of Testing and Materials (ASTM) publishes ASTM E2026-16a: “Standard Guide for Seismic Risk Assessment of Buildings”, and ASTM E2557-16a: “Standard Practice for Probable Maximum Loss (PML) Evaluations for Earthquake Due-Diligence Assessments”. These Guides provide standard definitions, scopes of work and guidelines for risk assessment of buildings as a part of real estate property due-diligence studies. The Guides also have relevance in insurance related studies, as well as for engineering risk studies for owners or property managers.

Commonly Used Terms

The term ‘Probable Maximum Loss’ or ‘PML’ is synonymous with seismic risk studies, but usage of the term varies widely. The term emerged from fire insurance underwriting practice (Steinbrugge, 1982), and has been variously defined. Some earthquake risk practitioners use PML to describe a loss estimate for the worst-case earthquake scenario for the site. Others provide PML estimates for probabilistic ground motions having return periods of 200-, 300- or 475- years. Clients are further confused when PML’s are quoted by some as statistical mean damage, and by others as an upper bound (90th-centile) damage, often without distinction. Usage of the term ‘PML’ is so inconsistent that ASTM recommends the use of other terms: Scenario Loss and Probable Loss, instead of the term Probable Maximum Loss:

‘Scenario Loss’ (SL) is the closest proxy to PML, but with the clear definition of the earthquake hazards, and a clear statement of the probability of the risk estimate for the defined hazards. The earthquake scenario may be specified based upon:

    • Building code design earthquake ground motions
    • Selected earthquakes with magnitudes having a specified probability of exceedance.
    • A Modified Mercalli Intensity value, selected from published maps of maximum values, or calculated from peak ground acceleration values.
    • A ground motion with a specified return period, found from a probabilistic seismic hazard assessment.
Probable Loss (PL) provides a direct relationship between earthquake damage and return period (or probability of exceedance within a specified exposure period). PL is found by considering the full range of hazard states that may occur for the site, and the probability of occurrence of each hazard state within the exposure period. For each hazard state, building damage is found from a statistical damage distribution.

Professional Engineers in ImageCat have extensive experience in conducting seismic risk assessments for property managers, real estate lenders and owners. If you need consultation on a project, please feel free to contact us. We are ready to help!