Seismic Risk Assessments are an assessment that can be “forgotten” when the lender/buyer is not themselves in a seismic risk zone. Property that is in a high risk seismic zone should be evaluated for loss during “the big one.” Seismic Probable Maximum Loss Reports are engineering reports that evaluate the expected amount of loss that a building is expected to sustain during an earthquake event. Of the due diligence products that are offered, Seismic Probable Maximum Loss Reports are of the most important for property in a seismic risk zone. The number one reason is that most insurance policies exclude seismic loss in the event of an earthquake and damage is sustained to an asset. If the building burns down, the asset is covered, but if it falls down during an earthquake, in most cases, it’s not.
Not all seismic risk assessments and reports are alike. It is important that an experienced engineer conduct the calculations that goes into a report and that their evaluation is done to industry standards. Additionally, discussions in the report should be comprehensive in regards to specific areas of the asset that may require a seismic retrofit. This would in some cases, prevent some loan programs from being available to finance the property.
The full gamut of what is evaluated and how to understand these evaluations is answered by Partner’s Jenny Redlin and Joseph Derhake, PE in their recent presentation, Due Diligence 101: Third Party Reports from A-Z. This presentation was recently aired by GlobeSt.com and is offered on demand until July 2nd, 2013. Registration