Abstract
In disaster insurance, the assessment of spatial correlation of regions highly exposed to earthquakes is essential to diversify the risk in a portfolio. Earthquake hazard is extremely relevant in New Zealand due to its proximity to a seismic fault and the diversification of risk-based earthquake insurance premiums is crucial due to the high heterogeneity of population density. In this paper we explore the usefulness of multilevel mixed effects modeling in taking into account spatial correlation of earthquake losses in New Zealand. Total losses due to claims reported between 2000 and 2018 are modeled by assuming that wards in the same regions are correlated, and including geographical and demographic characteristics of New Zealand as well as peculiarities of insured buildings.