Earthquakes


The second earthquake to strike the Los Angeles area on March 28 is a wake-up call and reminder of the risk to commercial and residential properties in Southern California, according to catastrophe modeling firm EQECAT.

(The M5.1 quake located 1 mile south of La Habre follows the M4.4 earthquake near Beverley Hills (30 miles to the northwest) on March 17.)

In its report on the latest quake, EQECAT notes that most homeowners do not carry earthquake insurance (only about 12 percent of Californians have earthquake coverage, according to I.I.I. stats), and those that do typically carry deductibles ranging from 10 percent to 15 percent of the replacement value of the home, and commercial insurance often carries large deductibles and strict limits on insurance coverage.

The remainder of the risk which is not insured is retained by property owners and frequently, their lenders. EQECAT reports:

CoreLogic regional studies have noted that a major earthquake in the Los Angeles Basin could easily produce damages to residential and commercial property exceeding $200 billion (Source: the EQECAT Insured Loss Database, 2013). The general lack of insurance coverage and high deductibles have led to concerns over the likelihood of widespread residential mortgage defaults arising from a large basin earthquake.”

This raises an important point.

Concerns have been raised before (here) about how the lack of mandatory earthquake insurance in California would result in high levels of mortgage defaults should a major earthquake occur, with widespread economic implications.

The post-quake scenario envisioned is one in which homeowners walk away from their damaged homes without repairing them, leaving many homes in foreclosure and forcing banks to bear the brunt of the loss in capital.

The potential knock-on effect for insurers and reinsurers? The loss of home ownership could severely diminish incoming capital on homeowner insurance policies.

According to an Aon Benfield report, the 1994 Northridge earthquake cost the mortgage industry up to $400 million in mortgage defaults due to foreclosure expenses, property repair costs, lost interest income, write-downs of existing loan balances and other administrative costs.

Check out an informative I.I.I. background paper on earthquake risk and insurance issues here.

Twenty years on, the Northridge earthquake remains the costliest U.S. earthquake for insurers, causing $15.3 billion in insured damages when it occurred (about $24 billion in 2013 dollars), according to the Insurance Information Institute (I.I.I.).

The 6.7 magnitude quake, which hit Los Angeles on January 17, 1994, also still ranks as the fourth-costliest U.S. disaster, based on insured property losses (in 2013 dollars), topped only by Hurricane Katrina, the attacks on the World Trade Center and Hurricane Andrew.

On the global scale, the Northridge earthquake still ranks as the second costliest earthquake for insurers, after Japan’s earthquake and tsunami of 2011, according to Munich Re.

While there has been no major earthquake on the U.S. mainland since Northridge, I.I.I. president Dr. Robert Hartwig notes that the potential cost of U.S. earthquakes has been growing because of increasing urban development in seismically active areas and the vulnerability of older buildings, which may or may not have been built or upgraded to current building code.

Still many homeowners do not purchase earthquake insurance. A recent poll by the I.I.I. found that only one out of 10 American homeowners (10 percent) have earthquake insurance, compared with 13 percent in 2012.

In western states, 22 percent of homeowners said they have earthquake coverage, down from 27 percent.

Earthquakes are not covered under standard U.S. homeowners or business insurance policies. However, coverage is usually available in the form of an endorsement to a home or business insurance policy.

As Dr. Hartwig reminds us:

While the cost of insurance has increased since Northridge, it’s important that home and business owners in California and other vulnerable areas consider purchasing earthquake coverage, which is the fastest and most efficient path to recovery.”

Check out additional I.I.I. facts and statistics on earthquakes and tsunamis.

People living in areas most contaminated by the Fukushima Daiichi nuclear power plant (NPP) disaster that occurred during Japan’s March 2011 earthquake and tsunami, have a higher risk of developing certain cancers, according to a report by the World Health Organization (WHO).

Around one-third of emergency workers are also estimated to have an increased risk of developing certain cancers, the report notes.

The WHO says the findings underline the need for long-term health monitoring of those who are at high risk.

Dr Maria Neira, WHO Director for Public Health and Environment, notes:

A breakdown of data, based on age, gender and proximity to the nuclear plant, does show a higher cancer risk for those located in the most contaminated parts. Outside these parts – even in locations inside Fukushima Prefecture – no observable increases in cancer incidence are expected.”

In addition to strengthening medical support and services, WHO says continued environmental monitoring, in particular of food and water supplies, backed by enforcement of existing regulations, is required to reduce potential radiation exposure in future.

As well as the direct health impact on the population, the WHO report notes that the psychosocial impact may have a consequence on health and well-being and that these should not be ignored as part of the overall response.

The first-ever analysis of the global health effects due to radiation exposure after the Fukushima nuclear power plant disaster also points out that for the general population inside and outside of Japan, the predicted risks are low and no observable increases in cancer rates above baseline rates are anticipated.

The report is the result of a two-year WHO-led process of analysis of estimated doses and their potential health implications.

Just as the second Presidential debate was about to kick off last night, a 4.0 magnitude earthquake struck southern Maine.

The epicenter of the quake was located some 3 miles west of Hollis Center, Maine, west of Portland, but it was felt throughout New England.

The United States Geological Survey (USGS) notes that earthquakes in the central and eastern U.S., although less frequent than in the western U.S., are typically felt over a much broader region:

A magnitude 4.0 eastern U.S. earthquake typically can be felt at many places as far as 100 km (60 miles) from where it occurred, and it infrequently causes damage near its source. A magnitude 5.5 eastern U.S. earthquake usually can be felt as far as 500 km (300 miles) from where it occurred, and sometimes causes damage as far away as 40 km (25 miles).”

Moderately damaging earthquakes strike somewhere in New England every few decades, according to USGS. Smaller earthquakes are more common in the region and felt roughly twice a year.

The two largest known New England earthquakes occurred in 1638 (magnitude 6.5) in Vermont or New Hampshire, and in 1755 (magnitude 5.8) offshore from Cape Ann northeast of Boston. The Cape Ann quake caused severe damage to the Boston waterfront.

The most recent New England earthquake to cause moderate damage occurred in 1940 (magnitude 5.6) in central New Hampshire.

These numbers help put last night’s earthquake into perspective.

Remember earthquakes are not covered under standard homeowners and business insurance policies. However, coverage is available in the form of an endorsement to a home or business insurance policy.

Check out I.I.I. facts and stats on earthquake insurance.