What Do Lenders, Building Owners, And Structural Engineers Have In Common?
No, this is not the beginning of an industry inside joke but rather an opportunity to highlight the importance of seismic risk assessment for all parties dealing with any real estate property in a seismically active area. It is in everyone's best interest to ensure that a building's structural integrity is not greatly compromised during a sizeable earthquake event. Financial institutions often use an important tool as part of their underwriting process to assess and control risk exposure.
Probable Maximum Loss Report (PML) Tool For Seismic Risk Assessment
In order to protect the portfolio of a financial institution, owners, investors, and ultimately the building occupants, a tool known as the Probable Maximum Loss report (PML) is used by lenders to rate buildings for seismic risk. The PML predicts the amount of damage a building will sustain from a pre-set seismic event. The PML expresses the seismic damage as a percentage of the replacement cost of the building. Any building with a PML higher than what is an acceptable risk, may require mitigation to bring the risk level to acceptable thresholds.