Entries tagged with “Earthquake”.
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Tuesday, July 21, 2015
Posted by Claire under Catastrophes, Insurers and the Economy
Despite a rather quiet first half of 2015 for global catastrophes, insurers endured at least five separate billion-dollar insured loss events (all weather-related), according to Aon Benfield’s just-released Global Catastrophe Recap: First Half of 2015.
None of the events crossed the multi-billion dollar loss threshold ($2 billion or greater) and four of the five were recorded in the United States, Aon Benfield said.
The costliest event for the insurance industry was an extended period of snow and frigid temperatures in the U.S. during February ($1.8 billion in insured losses). (See our earlier post on first half winter storm losses here).
Other billion-dollar insured loss events in the U.S. included an early April severe thunderstorm outbreak ($1 billion), a severe thunderstorm and flash flood event at the end of May ($1.2 billion), and projected losses arising from the ongoing drought across the West ($1 billion and counting).
The sole billion-dollar insured loss event to be recorded outside the U.S. during the first half of 2015 was Windstorms Mike and Niklas in Western and Central Europe at the end of March/early April. Niklas became the first billion-dollar insured loss windstorm event in Europe since Xaver in December 2013, Aon Benfield said.
Note: the loss totals, which include those sustained by public and private insurance entities, are preliminary and subject to change.
If you’re wondering about the difference between economic and insured loss totals, the 7.8 magnitude earthquake that hit Nepal on April 25 (and subsequent aftershocks) is a good example.
From an economic loss standpoint, the Nepal earthquake ranks as the costliest global natural disaster during the first half of 2015, Aon Benfield reports.
Total damage and reconstruction costs throughout the impacted areas were estimated as high as $10 billion (subject to change), with reconstruction costs in Nepal alone put at nearly $7 billion.
Despite having a multi-billion-dollar economic cost to Nepal with overall economic effects poised to equal more than one-third of the country’s entire GDP, only a very small fraction of those losses – about 2 percent – was covered by insurance.
Check out Insurance Information Institute (I.I.I.) facts and statistics on global catastrophes here.
Thursday, April 30, 2015
Posted by Claire under Catastrophes, Earthquakes
As the death toll from Saturday’s devastating 7.8 magnitude earthquake in Nepal continues to rise, we’re reading about the health threat facing survivors.
In addition to the injured, an estimated 2.8 million people have been displaced by the earthquake as many are afraid to return to their homes.
The United Nations (UN) has launched an urgent appeal for $415 million to reach over 8 million people with life-saving assistance and protection over the next three months.
Its report offers insight into the scale of the unfolding humanitarian disaster:
According to initial estimations and based on the latest earthquake intensity mapping, over 8 million people are affected in 39 of Nepal’s 75 districts. Over 2 million people live in the 11 most critically hit districts.”
The government estimates that over 70,000 houses have been destroyed, Over 3,000 schools are located in the 11 most severely affected districts. Up to 90 percent of health facilities in rural areas have been damaged. Hospitals in district capitals, including Kathmandu, are overcrowded and lack medical supplies and capacity.”
Strong tremors have damaged infrastructure, including bridges and roads and telecommunications systems. Transport of fresh water has been interrupted and fuel is running low in many areas.
The UN also reports that an estimated 3.5 million people are in need of food assistance, of which 1.4 million need priority assistance, while 4.2 million are urgently in need of water, sanitation and hygiene support.
While it’s far too early to know if these estimates will hold, clearly the Nepal earthquake is as catastrophe modeling firm RMS says: “shaping up to be the worst natural disaster this calendar year, particularly because Nepal is remote, economically challenged, and not resilient to an earthquake of this magnitude.”
Indeed, the earthquake is expected to inflict at least $5 billion in total economic losses – that’s more than 20 percent of Nepal’s gross domestic product – and could end up exceeding the country’s GDP.
Not surprisingly, insurance penetration in what is one of the world’s poorest nations is extremely low, as the I.I.I. explains here.
Information on the most deadly and the most costly world earthquakes is posted here.
Wednesday, December 24, 2014
Posted by Claire under Catastrophes, Earthquakes
December 26 marks the 10th anniversary of the Indonesian earthquake and tsunami which killed more than a quarter of a million people in Indonesia, Thailand, Sri Lanka, India and other countries surrounding the Indian Ocean.
A decade later, it’s perhaps surprising to read that weaknesses remain in the tsunami warning system across the region.
Yet maybe the best protection for residents living in tsunami-vulnerable areas is to learn natural tsunami warning signals and which areas have the highest flood risk.
A gallery of tsunami protection lessons posted by Allianz cites three key signs from GeoHazards International’s Tsunami Preparedness Guidebook:
-Strong earthquake shaking, particularly shaking lasting longer than 30 seconds;
-Withdrawal of the sea to unusually low levels; and
-Loud roar from the ocean, similar to a jet airplane, explosion or sudden, intense rainfall.
Identifying evacuation routes — creating hazard and evacuation maps showing the quickest and safest routes to higher ground or other safe areas — is also a key recommendation. Allianz notes that it is critical to involve government and emergency responders when developing these maps.
Education and awareness among residents in tsunami-prone areas then, can play as important a role as instrument-based tsunami warning systems.
In addition to high mortality risk, earthquakes and tsunamis can cause significant insured property damages.
While insured losses from earthquakes and tsunamis amounted to just $45 million in 2013, this was far below the record $54 billion recorded in 2011, according to facts and statistics compiled by the I.I.I.
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 losses.
The Japan and New Zealand quakes are among the 10 costliest world earthquakes and tsunamis, based on insured damages, according to Munich Re.
Wednesday, October 15, 2014
Posted by Claire under Earthquakes, Insurers and the Economy
Some 25 years after the Loma Prieta earthquake, the San Francisco Bay area faces increased risk of a major quake, two separate studies suggest.
A study published online in the Bulletin of the Seismological Society of America says that sections of the San Andreas fault system—the Hayward, Rodgers Creek and Green Valley faults—are nearing or past their average earthquake recurrence intervals.
It says the faults ‘are locked and loaded’ and estimates a 70 percent chance that one of them will rupture within the next 30 years. This would trigger an earthquake of magnitude 6.7 or larger, the study’s authors say.
A second study by catastrophe modeler RMS says the next major quake could be financially devastating to the Bay Area economy in part because of low earthquake insurance penetration.
RMS warns that a worst-case 7.9 magnitude earthquake on the San Andreas fault could cause over $200 billion in commercial and residential property losses, yet only 10 percent of households currently have earthquake insurance.
Dr. Patricia Grossi, earthquake expert at RMS says:
The Bay Area has made significant progress in terms of infrastructure preparedness and retrofitting, but without significant earthquake insurance penetration to facilitate rebuilding, the recovery from a major earthquake will be considerably harder.”
Without insurance, homeowners may walk away after a quake if the residual value of their property is less than the outstanding value of their mortgage, RMS notes. Even those with insurance are likely to struggle to meet high deductibles, potentially leading to significant blight and disrepair in badly damaged neighborhoods.
Despite low earthquake insurance penetration, a magnitude 7.0 earthquake rupturing on the Hayward fault could produce $25 billion in insured loss across residential and commercial lines of business, RMS concludes.
A glance at the economic context shows that since the 1989 Loma Prieta earthquake, population in the Bay Area has increased 25 percent, while the value of residential property has jumped by 50 percent, reaching $1.2 trillion.
The Bay Area is also the most productive economy in the U.S. with a gross domestic product of $535 billion, ranking 19th in the world compared to national economies, RMS says.
Check out I.I.I. facts and stats on earthquakes.
Earthquake exposure is one of the biggest risks to workers compensation insurers, so it’s interesting to read that the California State Compensation Insurance Fund (SCIF) is once again looking to the capital markets to provide reinsurance protection for workers comp losses resulting from earthquakes.
This is a repeat of the first catastrophe bond sponsored by the SCIF in 2011 – Golden State Re Ltd sized at $200 million — which is due to expire in January 2015.
Artemis blog says:
The unique transaction, which has not been repeated by anyone else until now, links earthquake severity to workers compensation loss amounts demonstrating a new use of the catastrophe bond structure.”
The Golden State Re II catastrophe bond issuance is expected to be sized at $150 million or more, and will cover the SCIF until January 2019.
While the covered area is for earthquakes events across the United States, Artemis notes that as with the 2011 deal as much as 99.99 percent of the SCIF’s insurance portfolio is focused on California, so the risk is primarily focused on California-area earthquakes.
The new deal apparently carries a similar modeled loss trigger to the 2001 transaction, using the exposures of a notional portfolio of workers compensation risks in the SCIF portfolio, earthquake severity factors (ground motion), geographic distribution of the covered portfolio, types of buildings covered, time of day and the day of week an event occurs as some of the weighting factors.
An earthquake has to be magnitude 5.5 or greater to trigger the catastrophe bond, according to Artemis, and losses after an event will be modeled deterministically, so not related to actual injuries and fatalities, using the earthquake event parameters. This will be modeled against the notional portfolio using day/time weighting to determine an index value and notional modeled loss amount.
A 2007 report by EQECAT for the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) estimated California workers compensation insurers would pay annual losses of $180 million caused by earthquakes.
The report suggested that the losses would affect 15.6 million employees working during a major earthquake.
Check out I.I.I. facts and stats on workers compensation insurance.
Monday, August 25, 2014
Posted by Claire under Business Risk, Earthquakes
One day after a magnitude 6.0 earthquake struck the San Francisco/Napa area of California, the Northern California Seismic System (NCSS) says there is a 29 percent probability of a strong and possibly damaging aftershock in the next seven days and a small chance (5 to 10 percent probability) of an earthquake of equal or larger magnitude.
The NCSS, operated by UC Berkeley and USGS, added that approximately 12 to 40 small aftershocks are expected in the same seven-day period and may be felt locally.
As a rule of thumb, a magnitude 6.0 quake may have aftershocks up to 10 to 20 miles away, the NCSS added.
According to Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.), this earthquake is the strongest to impact the area since the 1989 Loma Prieta quake which resulted in $1.8 billion in insured claims (in 2013 dollars) being paid to policyholders.
Initial reports suggest the greatest damage has been to historic buildings in the city of Napa, with the downtown area cordoned off to fully assess damage. There have also been reports of non-structural damage such as items falling off shelves, including wine bottles and barrels, and substantial sprinkler leakage to many buildings.
The Napa region is most known for its wine industry, but tourism draws visitors to the area year-round.
A report by catastrophe modelers CoreLogic EQECAT gave an initial estimate of $500 million to $1 billion in insured losses. Residential losses would account for about one half to one quarter of this loss estimate.
If the loss exceeds $1 billion it will be from uncertainty in commercial losses, CoreLogic EQECAT said, and losses to the wine industry could increase this estimate:
Business interruption (BI) losses are a major concern. As this is a very popular tourist area, many businesses – including wineries and restaurants – have sustained damage, both non-structural and structural.”
CoreLogic EQECAT noted that the Napa Valley wine harvest was already underway. Losses would have been less if this event had occurred pre-harvest.
According to the Napa Valley Vintners Association, while there have been reports of damage at some Napa Valley wineries and production and storage facilities, particularly those in the Napa and south Napa areas, vintners are still assessing their individual situations. More information is expected in the next 24 to 72 hours.
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.
I.I.I. earthquake facts and stats show California had the largest amount of earthquake premiums in 2013, at $1.6 billion, accounting for 61 percent of U.S. earthquake insurance premiums written.
This figure includes the state-run California Earthquake Authority, the largest provider of residential earthquake insurance in California. 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.
The percentage of homeowners and renters who have earthquake insurance in the affected area is very low – in Napa less than 6 percent, and in Sonoma less than 10 percent, according to the California Earthquake Authority.
Check out key facts from the I.I.I. on the insurance industry’s contribution to the California economy here.
Thursday, April 3, 2014
Posted by Claire under Earthquakes, Insurers and the Economy
The second earthquakeÂ 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.â€
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 Japanâ€™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, itâ€™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.â€
Check out additional I.I.I. facts and statistics on earthquakes and tsunamis.
Wednesday, October 17, 2012
Posted by Claire under Earthquakes
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).â€
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 nightâ€™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.
Wednesday, March 21, 2012
Posted by Claire under Catastrophes
The magnitude 7.4 earthquake that hit Mexico yesterday may not have resulted in any tsunamis for the U.S., but this does not diminish the tsunami threat.
Major tsunamis are produced by large earthquakes (greater than magnitude 7 on the Richter scale) and those with shallow focus (<30km depth), according to NOAA.
Since 1850 tsunamis have been responsible for the loss of over 420,000 lives and billions of dollars of damage to coastal structures and habitats, NOAA says. Most of these casualties were caused by local tsunamis that occur about once per year somewhere in the world.
Tsunamis also result from distant earthquakes. Last yearâ€™s magnitude 9.0 Japan earthquake and the 2010 Chile earthquake caused tsunami strikes in Hawaii, Alaska, Washington, Oregon, and California, for example.
Next week is National Tsunami Preparedness Week, so now is a good time to remind ourselves of the risk and what to do if a tsunami happens.
By the way, catastrophe modeler EQECAT estimates that yesterdayâ€™s Mexico quake will result in insured losses of less than $100 million.
Check out this I.I.I. release for more information on earthquake insurance Mexico and a chart of the most costly world earthquake/tsunamis.