Earthquakes and Tsunamis

WORLD

On Saturday April 25, 2015 a 7.8 magnitude earthquake struck Nepal. Thousands of people were killed and many more injured. Aftershocks from the earthquake could persist for years according to geologists. Only a small fraction of the economic losses are covered by insurance. Operating in one of the world’s poorest nations, Nepal’s insurers collected $102 million in premiums for non-life coverages in 2013, according to Axco Insurance Information Services.

The deadliest earthquake in 2014 resulted from a magnitude 6.1 earthquake that hit Wenping in the Yunnan Province of China in August, with 731 people killed or missing. Economic losses totaled $5 billion, according to Swiss Re. There were a total of 15 catastrophic earthquakes in 2014, one of them in the United States, in South Napa, California. Insured losses from earthquakes and tsunamis were $313 million in 2014, higher than the $45 million in insured losses resulting from earthquakes in 2012 but far below 2011’s record $54 billion, according to Swiss Re.

The second largest earthquake in 2014 in terms of total damages was the August 6.0-magnitude quake in South Napa, California, that caused $700 million in total damage and $153 million in insured losses. On March 11, 2011 a devastating tsunami hit the coast of northeast Japan, triggered by a powerful earthquake approximately 80 miles offshore. The quake and tsunami caused $35.7 billion in insured damages, according to Swiss Re. Also, early in 2011 a powerful earthquake struck Christchurch, New Zealand, resulting in $15.3 billion in insured damages. The Japan and New Zealand quakes are among the 10 costliest world earthquakes and tsunamis, based on insured damages, according to Munich Re (see table).

 

WORLD INSURED CATASTROPHE LOSSES, 2005-2014 (1)

(2014 $ millions)

Year Weather-related
natural catastrophes
Man-made Earthquakes Total
2005 $123,018 $6,593 $284 $129,895
2006 14,685 5,984 95 20,764
2007 26,840 6,590 640 34,069
2008 46,909 9,094 464 56,467
2009 23,764 4,599 672 29,036
2010 32,212 5,181 14,640 52,032
2011 68,980 6,255 56,429 131,664
2012 72,235 6,030 1,894 80,159
2013 36,531 7,857 46 44,434
2014 27,437 6,958 313 34,708

(1) In order to maintain comparability of the data over the course of time, the minimum threshold for losses was adjusted annually to compensate for inflation in the United Sates. Adjusted to 2014 dollars by Swiss Re.

Source: Swiss Re.

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TOP 10 MOST COSTLY WORLD EARTHQUAKES AND TSUNAMIS BY INSURED LOSSES, 1980-2014 (1)

($ millions)

      Losses when occurred  
Rank Date Location Overall Insured (2) Fatalities
1 Mar. 11, 2011 Japan: Aomori, Chiba, Fukushima, lbaraki, lwate, Miyagi, Tochigi, Tokyo, Yamagata. Includes tsunami $210,000 $40,000 15,880
2 Feb. 22, 2011 New Zealand: Canterbury, Christchurch, Lyttelton 24,000 16,500 185
3 Jan. 17, 1994 USA: CA: Northridge, Los Angeles, San Fernando Valley, Ventura, Orange 44,000 15,300 61
4 Feb. 27, 2010 Chile: Concepcion, Metropolitana, Rancagua, Talca, Temuco, Valparaiso. Includes tsunami 30,000 8,000 520
5 Sep. 4, 2010 New Zealand: Canterbury, Christchurch, Avonside, Omihi, Timaru, Kaiapoi, Lyttelton 10,000 7,400 NA
6 Jan. 17, 1995 Japan: Hyogo, Kobe, Osaka, Kyoto 100,000 3,000 6,430
7 Jun. 13, 2011 New Zealand: Canterbury, Christchurch, Lyttelton 2,700 2,100 1
8 May 20 and May 29, 2012 Italy: Emilia-Romagna, San Felice del Panaro, Cavezzo, Rovereto di Novi, Carpi, Concordia. Series of earthquakes 16,000 1,600 18
9 Dec. 26, 2004 Sri Lanka: Indonesia, Thailand, India, Bangladesh, Myanmar, Maldives, Malaysia. Includes tsunami 10,000 1,000 220,000
10 Oct. 17, 1989 USA: CA: Loma Prieta, Santa Cruz, San Francisco, Oakland, Berkeley, Silicon Valley 10,000 960 68

(1) As of January 2015. Ranked on insured losses when occurred.
(2) Based on property losses including, if applicable, agricultural, offshore, marine, aviation and National Flood Insurance Program losses in the United States and may differ from data shown elsewhere.

NA=Data not available.

Source: © 2015 Munich Re, Geo Risks Research, NatCatSERVICE.

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UNITED STATES

The costliest U.S. earthquake, the 1994 Northridge quake, caused $15.3 billion in insured damages when it occurred (about $24 billion in 2014 dollars). It ranks as the fifth-costliest U.S. disaster, based on insured property losses (in 2014 dollars), topped only by Hurricane Katrina, the attacks on the World Trade Center, Hurricane Andrew and superstorm Sandy. Eight of the costliest U.S. quakes, based on inflation-adjusted insured losses, were in California, according to Munich Re. On August 24, 2014 a 6.0-magnitude earthquake struck South Napa, California, killing one person and causing $700 million in total damage and $150 million in insured losses, according to Munich Re.

 

TOP 10 MOST COSTLY U.S. EARTHQUAKES BY INFLATION-ADJUSTED INSURED LOSSES (1)

($ millions)

        Insured losses (2)  
Rank Date Location Overall losses
when occurred
Dollars
when
occurred
In 2014
dollars (3)
Fatalities
1 Jan. 17, 1994 California: Northridge, Los Angeles, San Fernando Valley, Ventura, Orange $44,000 $15,300 $24,440 61
2 Apr. 18, 1906 California: San Francisco, Santa Rosa, San Jose 524 180 4,300 (4) 3,000
3 Oct. 17, 1989 California: Loma Prieta, Santa Cruz, San Francisco, Oakland, Berkeley, Silicon Valley 10,000 960 1,830 68
4 Feb. 28, 2001 Washington: Olympia, Seattle, Tacoma; Oregon 2,000 300 400 1
5 Mar. 27-28, 1964 Alaska: Anchorage, Kodiak Island, Seward, Valdez, Portage, Whittier, Cordova, Homer, Seldovia 540 45 340 131
6 Feb. 9, 1971 California: San Fernando Valley, Los Angeles 553 35 200 65
7 Oct. 1, 1987 California: Los Angeles, Whittier 360 75 160 8
8 Aug. 24, 2014 California: Napa, Vallejo, Solano, Sonoma, American Canyon 700 150 150 1
9 Apr. 4, 2010 California: San Diego, Calexico, El Centro, Los Angeles, Imperial; Arizona: Phoenix, Yuma 150 100 110 NA
10 Sep. 3, 2000 California: Napa 80 50 70 NA

(1) Costliest U.S. earthquakes occurring from 1950 to 2014, based on insured losses when occurred. Includes the 1906 San Francisco, California, earthquake, for which reliable insured losses are available.
(2) Based on property losses including, if applicable, agricultural, offshore, marine, aviation and National Flood Insurance Program losses in the United States and may differ from data shown elsewhere.
(3) Inflation-adjusted to 2014 dollars by Munich Re.
(4) Inflation-adjusted to 2014 dollars based on 1913 Bureau of Labor Statistics data (earliest year available).

NA=Data not available.

Source: © 2015 Munich Re, NatCatSERVICE.

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The previous chart ranks historic earthquakes based on their total insured property losses, adjusted for inflation. The chart below uses a computer model to measure the estimated impact of historical quakes according to current exposures. The analysis, conducted in 2012, is based on AIR Worldwide's U.S. earthquake model. It makes use of the firm's property exposure database and takes into account the current number and value of exposed properties.

 

ESTIMATED INSURED LOSSES FOR THE TOP 10 HISTORICAL EARTHQUAKES BASED ON CURRENT EXPOSURES (1)

($ billions)

Rank Date Location Magnitude Insured loss
(current exposures)
1 Feb. 7, 1812 New Madrid, MO 7.7 $112
2 Apr. 18, 1906 San Francisco, CA 7.8 93
3 Aug. 31, 1886 Charleston, SC 7.3 44
4 Jun.  1, 1838 San Francisco, CA 7.4 30
5 Jan. 17, 1994 Northridge, CA 6.7 23
6 Oct. 21, 1868 Hayward, CA 7.0 23
7 Jan. 9, 1857 Fort Tejon, CA 7.9 8
8 Oct. 17, 1989 Loma Prieta, CA 6.3 7
9 Mar. 10, 1933 Long Beach, CA 6.4 5
10 Jul. 1, 1911 Calaveras, CA 6.4 4

(1) Modeled loss to property, contents, business interruption and additional living expenses for residential, mobile home, commercial and auto exposures as of December 31, 2011. Losses include demand surge and fire following earthquake. Policy conditions and earthquake insurance take-up rates are based on estimates by state insurance departments and client claims data.

Source: AIR Worldwide Corporation.

 

 

TOP 10 WRITERS OF EARTHQUAKE INSURANCE BY DIRECT PREMIUMS WRITTEN, 2014

($000)

Rank Group/company Direct premiums written (1) Market share (2)
1 California Earthquake Authority $606,977 20.8%
2 Zurich Insurance Group (3) 232,700 8.0
3 State Farm Mutual Automobile Insurance 228,547 7.8
4 American International Group (AIG) 148,390 5.1
5 Travelers Companies Inc. 140,077 4.8
6 GeoVera Insurance Holdings Ltd. 117,634 4.0
7 Liberty Mutual 90,195 3.1
8 ACE Ltd. 87,253 3.0
9 Swiss Re Ltd. 72,589 2.5
10 Chubb Corp. 62,542 2.1

(1) Before reinsurance transactions, includes state funds.
(2) Based on U.S. total, includes territories.
(3) Data for Farmers Insurance Group of Companies and Zurich Financial Group (which owns Farmers' management company) are reported separately by SNL Financial.

Source: SNL Financial LC.

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EARTHQUAKE INSURANCE

Standard homeowners, renters and business insurance policies do not cover damage from earthquakes. Coverage is available either in the form of an endorsement or as a separate policy. Earthquake insurance provides protection from the shaking and cracking that can destroy buildings and personal possessions. Coverage for other kinds of damage that may result from earthquakes, such as fire and water damage due to burst gas and water pipes, is provided by standard home and business insurance policies. Earthquake coverage is available mostly from private insurance companies. In California homeowners can also get coverage from the California Earthquake Authority (CEA), a privately funded, publicly managed organization. Only about 10 percent of California residents currently have earthquake coverage, down from about 30 percent in 1996, two years after the Northridge, California, earthquake.

Ten percent of homeowners responding to a 2015 poll by the Insurance Information Institute said they have earthquake insurance. Eighteen percent of homeowners in the West were most likely to buy earthquake coverage; followed by the Northeast at 9 percent; the Midwest at 8 percent; and the South at 7 percent. See page __ for information on earthquake insurance losses.

 

EARTHQUAKE INSURANCE, DIRECT PREMIUMS WRITTEN BY STATE, 2014 (1)

($000)

Rank State Direct premiums written ($000)
1 California $1,656,283
2 Washington 162,245
3 Missouri 91,893
4 Tennessee 75,402
5 Oregon 69,684
6 Illinois 67,095
7 New York 50,597
8 Kentucky 41,818
9 Utah 41,122
10 Indiana 37,968
11 South Carolina 37,147
12 Texas 35,820
13 Ohio 30,550
14 Arkansas 29,855
15 Vermont 28,361
16 Florida 25,280
17 Alaska 24,676
18 Massachusetts 21,873
19 Nevada 19,694
20 New Jersey 19,339
21 Virginia 17,921
22 Mississippi 17,634
23 Pennsylvania 17,316
24 Georgia 16,627
25 Oklahoma 16,437
26 North Carolina 13,427
27 Hawaii 12,303
28 Maryland 11,039
29 Colorado 10,231
30 Arizona 9,087
31 Michigan 8,488
32 Connecticut 8,428
33 Alabama 7,721
34 Kansas 6,738
35 Louisiana 6,487
36 Minnesota 6,470
37 Wisconsin 5,820
38 Iowa 5,121
39 Montana 4,258
40 Idaho 4,164
41 Wyoming 2,982
42 D.C. 2,882
43 Nebraska 2,722
44 Rhode Island 2,681
45 New Hampshire 2,617
46 New Mexico 2,381
47 Maine 1,836
48 West Virginia 1,474
49 Delaware 1,259
50 South Dakota 858
51 North Dakota 821
  United States $2,794,930

(1) Includes the California Earthquake Authority, a state fund.

Source: SNL Financial LC.

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  • Earthquake insurance rose from $2.7 billion in 2013 to $2.8 billion in 2014.
  • California had the largest amount of earthquake premiums in 2014, at $1.7 billion, accounting for 59 percent of U.S. earthquake insurance premiums written. This figure includes the state-run California Earthquake Authority, the largest provider of earthquake insurance in California. The next highest ranking states were Washington state (6 percent of premiums) Missouri (3 percent), Tennessee (3 percent) and Oregon (2 percent).

EARTHQUAKE INSURANCE, 2005-2014

($000)

Year Net premiums written (1) Annual percent change Combined ratio (2) Annual point change (3)
2005 $1,106,671 0.7% 50.9 2.3 pts.
2006 1,315,423 18.9 40.4 -10.5
2007 1,246,538 -5.2 30.0 -10.4
2008 1,259,872 1.1 33.5 3.5
2009 1,288,353 2.3 36.3 2.8
2010 1,443,598 12.0 41.4 5.1
2011 1,467,372 1.6 55.8 14.4
2012 1,593,451 8.6 36.3 -19.5
2013 1,586,985 -0.4 30.3 -6.0
2014 1,641,847 3.5 34.1 3.8

(1) After reinsurance transactions, excludes state funds.
(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration.
(3) Calculated from unrounded numbers.

Source: SNL Financial LC.

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