In one sentence
A study estimating a building's probable maximum loss from an earthquake, informing insurance and lending decisions in seismic zones.
The longer version
The PML figure quantifies expected seismic loss, and lenders set thresholds above which earthquake insurance or structural work is required. It is standard diligence in exposed markets like California.
The seismic report is a location-driven diligence item that can trigger insurance requirements or reserves.
Common questions
- What is a PML in a seismic report?
- Probable maximum loss: an estimate of the damage a building would likely suffer in a significant earthquake, expressed as a percentage of replacement cost.
- When do lenders require a seismic report?
- For properties in seismically active areas, to decide whether earthquake insurance or retrofit work is needed.
- What happens if the PML is high?
- The lender may require earthquake insurance, structural retrofit, or adjust the loan terms, depending on its thresholds.
Keep reading
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The commercial loan closing processThe five stages from term sheet to funded.
- Due diligence softwareThe request list, the owners and the dates in one place.