Most structured finance lenders -CMBS, Fannie Mae, Freddie Mac - and most life companiesrequire a Seismic Damageability Assessment, a.k.a Probable MaximumLoss Report, if the asset being underwritten is in an area ofthe country with high seismic activity.

A lot of people translate this to“everything in California.” Actually, 15 states have highseismic zones, and as exhibited yesterday with a5.8 earthquake in Virginia, even relatively low risk areas canbe subject to major seismic activity.

U.S. Seismic Maps

So how do you know when you need tothink about seismic risk? There are lots of maps of seismicactivity for the United States, so which map should an underwriteruse? The U.S. seismic map that almost everyone uses isseismic map from the Uniform Building Code (1997). This map is integrated into one of the ASTM Standards (E2557Standard Practice for Probable Maximum Loss [PML] Evaluations forEarthquake Due Diligence Assessments). It is typical torequire Probable Maximum Loss Reports in areas classified as Zones3 or 4 by this map. Our firm prints up laminated versions ofthis map for underwriters - if you want one just send me anemail.

For those who are not interested inconforming to the rest of the real estate finance world, you maywonder if this is the best seismic map. Hmmm? Maybenot, but the difference is minimal. The United StatesGeologic Service (USGS) published a more recent and more accurateNationalSeismic Hazard Map in 2008. It would be prudent torequire a PML on areas within the three highest hazardtiers.

Seismic Maps for Canada, Mexico andEurope

If your lending footprint is largerthan the United States you may be interested in seismic hazards inMexico, Canada and Europe. Below are links to the bestseismic maps for each region.

• Seismic Map forMexico
• Seismic Map forCanada
• Seismic Map forEurope

My firm does Probable Maximum LossReports in Canada, Mexico and Europe to the same ASTMstandards: ASTM E2026 Standard Guide for Seismic RiskAssessment of Buildings; and ASTM E2557Standard Practice for Probable Maximum Loss (PML)Evaluations.

Probable Maximum Loss Webinar

I will be putting on a seismicwebinar on November 1st where I discuss minor issues like seismicmaps and larger issues like the difference between the ScenarioExpected Limit (SEL) and the Scenario Upper Limit (SUL). Ifyou use PMLs as anunderwriting tool, you will find this webinar an hour wellspent. If you are interested email me at [email protected].