Earthquakes can create both structural and financial risks for commercial buildings, particularly in regions with significant seismic activity. Understanding SEL vs. SUL can help building owners, lenders, insurers, and other stakeholders better evaluate that risk and make more informed decisions about a property.
Seismic risk assessments estimate the potential damage and financial loss a building could experience during an earthquake. These assessments can help guide lending, insurance, investment, and retrofit decisions. Older terminology such as Probable Maximum Loss (PML) has increasingly been replaced by more standardized measures, including Scenario Expected Loss (SEL) and Scenario Upper Loss (SUL).
This guide explains SEL and SUL in straightforward terms, including how they differ, how they are used, and what they can tell you about a building’s seismic risk.
What are PML, SEL, and SUL?
Before looking at SEL and SUL, it helps to understand PML, the older terminology they largely replaced.
Probable Maximum Loss
PML is an older term used to estimate the potential maximum loss a building might experience during a seismic event. While PML provided a useful starting point, its broad definition led to inconsistencies in its application and interpretation.
As a result, the industry has moved toward more precise and standardized terms: SEL and SUL.
Scenario Expected Loss
SEL estimates the amount of damage a building is likely to experience during a specific earthquake. It reflects a loss level with about a 50% chance of being exceeded and is expressed as a percentage of the building’s replacement value.
For example, if a building has a replacement value of $10 million and an SEL of 20%, the expected loss would be about $2 million.
Scenario Upper Loss
Also known as PML90, SUL estimates a more conservative level of potential loss. In simple terms, it represents a loss amount that has only a 10% chance of being exceeded.
SUL helps stakeholders evaluate upper-bound loss exposure for risk management, insurance, and other financial decisions.
For example, if that same $10 million building has an SUL of 40%, the more conservative loss estimate would be about $4 million.
SEL vs. SUL: What’s the Difference?
SEL and SUL provide different views of potential earthquake-related losses. SEL generally reflects expected loss, while SUL provides a more conservative upper-bound estimate. The most useful measure depends on the purpose of the assessment and the decisions being made.
The table below shows some common ways SEL and SUL may be used.
|
SEL Typical Use Case |
SUL Typical Use Case | |
| Risk Assessment | SEL estimates expected damage under a specified seismic scenario and can support general risk assessment and planning. | SUL provides a more conservative estimate of potential loss and can help stakeholders evaluate upper-bound risk exposure. |
| Investment Decisions | SEL can help investors and lenders evaluate expected seismic losses when considering a property’s financial risk. | SUL provides a more conservative loss estimate that may be useful when evaluating higher-risk properties, critical facilities, or other situations where upper-bound loss exposure is important. |
| Insurance | SEL can help insurers and other stakeholders evaluate expected loss exposure as part of a property’s seismic risk assessment. | SUL can help stakeholders evaluate more conservative loss exposure when considering insurance and risk-management needs. |
Use SEL to understand expected loss exposure for planning, investment, lending, and insurance decisions.
Use SUL to understand more conservative upper-bound loss exposure for risk management, lending, and insurance decisions.
How Seismic Retrofitting Can Affect SEL and SUL
Higher SEL and SUL values generally mean a building could experience greater damage and financial loss during an earthquake. Seismic retrofitting can address structural weaknesses that contribute to that risk and improve the building’s expected performance.
Depending on the structure, retrofit work may include strengthening connections, adding shear walls or bracing, reinforcing structural components, or improving foundations and anchorage.
By reducing the building’s seismic vulnerability, these improvements may also lead to lower loss estimates in future seismic risk assessments.
While retrofitting requires an upfront investment, it can help reduce the potential for costly earthquake damage and improve the building’s overall resilience.
Addressing Seismic Risk Through Retrofitting
SEL and SUL can help clarify a building’s potential earthquake risk, but understanding the numbers is only part of the process. The next question is what, if anything, needs to be done about them.
If a seismic risk assessment identifies structural concerns, Saunders Seismic can help you understand retrofit options, budget implications, and construction considerations. We work closely with owners, property managers, engineers, lenders, and other stakeholders to make the process as clear and manageable as possible.
Whether you are responding to lender requirements, planning ahead for a future investment, or looking to reduce seismic risk, our goal is to help you move forward with confidence.
Contact Saunders Seismic to discuss your building and the next steps.
