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<p>The increasing economic losses attributed to earthquakes underscore the urgent need for a proactive financial strategy that accounts for earthquake-related losses in high-risk areas. Disaster risk financing mechanisms, such as parametric risk transfer instruments, e.g., catastrophe bonds (Cat Bonds), provide an effective approach to risk management by shifting financial exposure from government entities to capital markets. In this study, the relationships between earthquake parameters and economic losses in Israel’s Hula–Kinneret Basin are investigated, and they are compared with those in three other seismic zones: Arava, Aragones, and Arnon–Dakar. We propose a methodology to evaluate how the moment magnitude, epicenter location, and fault depth affect economic losses. Our results indicate that economic losses typically remain below the government biannual reserve (IBR) threshold of approximately <InlineEquation ID="IEq1"> <EquationSource Format="TEX">\(\text {USD}\,0.5\)</EquationSource> </InlineEquation> billion (in 2020), although further examination of broader financial risk management implications is warranted. We find that only earthquakes <InlineEquation ID="IEq2"> <EquationSource Format="TEX">\(\text {Mw}\ge 6.5\)</EquationSource> </InlineEquation> necessitate consideration of the epicenter location and fault depth, as their influence on overall losses increases with magnitude. Additionally, moderate to strong earthquakes can impact distant, densely populated areas. The significance of fault location decreases when the epicenter does not substantially affect economic loss. To address these findings, we recommend a two-tiered disaster risk transfer strategy: one for low- to moderate-magnitude earthquakes (Mw <InlineEquation ID="IEq3"> <EquationSource Format="TEX">\( &lt; 6.5\)</EquationSource> </InlineEquation>), which considers only magnitude and depth, and another for larger events (Mw <InlineEquation ID="IEq4"> <EquationSource Format="TEX">\( \ge 6.5\)</EquationSource> </InlineEquation>), which incorporates all relevant physical parameters. This framework can be applied in other seismic regions, enhancing preparedness and resilience against earthquake-related economic impacts.</p>

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The economic implications of earthquake parameters for formulating financial risk management strategies: the Dead Sea Fault, Israel

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年5月13日

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  • Alexandra Osipov,
  • Ran Calvo,
  • Rom Aviv,
  • Simi Haber,
  • Tsafrir Levi

摘要

The increasing economic losses attributed to earthquakes underscore the urgent need for a proactive financial strategy that accounts for earthquake-related losses in high-risk areas. Disaster risk financing mechanisms, such as parametric risk transfer instruments, e.g., catastrophe bonds (Cat Bonds), provide an effective approach to risk management by shifting financial exposure from government entities to capital markets. In this study, the relationships between earthquake parameters and economic losses in Israel’s Hula–Kinneret Basin are investigated, and they are compared with those in three other seismic zones: Arava, Aragones, and Arnon–Dakar. We propose a methodology to evaluate how the moment magnitude, epicenter location, and fault depth affect economic losses. Our results indicate that economic losses typically remain below the government biannual reserve (IBR) threshold of approximately \(\text {USD}\,0.5\) billion (in 2020), although further examination of broader financial risk management implications is warranted. We find that only earthquakes \(\text {Mw}\ge 6.5\) necessitate consideration of the epicenter location and fault depth, as their influence on overall losses increases with magnitude. Additionally, moderate to strong earthquakes can impact distant, densely populated areas. The significance of fault location decreases when the epicenter does not substantially affect economic loss. To address these findings, we recommend a two-tiered disaster risk transfer strategy: one for low- to moderate-magnitude earthquakes (Mw \( < 6.5\) ), which considers only magnitude and depth, and another for larger events (Mw \( \ge 6.5\) ), which incorporates all relevant physical parameters. This framework can be applied in other seismic regions, enhancing preparedness and resilience against earthquake-related economic impacts.