Probable Maximum Loss Reports

A Probable Maximum Loss report is the primary tool that lenders use to control their exposure to a seismic event.  However, the practice of Probable Maximum Loss Assessments has left much to be desired over the years. Many consultants produce reports that are more or less black box reports.  The structural engineer does not show their math or justify the values assigned to the building.  The reader is left not understanding the process.  

ASTM E 2557-2007 went a long way to guide engineers in preparing PMLs.   However, ASTM E 2557 passed on the most important question: the method of calculations.  The Thiel Zsutty Method is the industry leading method; however several other methodologies exist.  I have advocated in a recent article on PMLs and to all of my clients that the lender require the Thiel Zsutty Method, as this will yield consistency and transparency.  Finally, I have been advocating that lenders require their engineers to show their math; otherwise their work is not peer reviewable.

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