MEDIA ADVISORY: Reporters Covering Insurance Implications of Bay Area Earthquake Can Contact the I.I.I. For Analysis, Facts and Stats

August 24, 2014

FOR IMMEDIATE RELEASE New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, August 24, 2014 — Reporters covering the insurance implications of the earthquake that shook the San Francisco Bay Area today are encouraged to contact the Insurance Information Institute (I.I.I.). The I.I.I. can provide information on earthquake insurance coverage as well as facts and statistics.

 

"While it is too soon to assess the extent of damage from today’s 6.0-magnitude earthquake and its aftershocks, the temblor is a reminder that those living in earthquake prone areas of the country need to have proper coverage,” said Dr. Robert Hartwig, president of the I.I.I. and an economist, adding that “Today’s earthquake was 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.”

 

“The potential cost of earthquakes has been growing in many parts of the world, including the U.S. because of increasing urban development in seismically active areas and the vulnerability of older buildings, which may not have been built or upgraded to current building codes,” said Dr. Hartwig. 

 

The Northridge event stands as the costliest earthquake in United States history, with insured losses totaling $24.1 billion (in 2013 dollars).

 

The U.S. has about 20,000 earthquakes annually, mostly small, and 42 states are at risk of quakes, according to the U.S. Geological Survey.  One of the worst catastrophes in U.S. history, the San Francisco Earthquake of 1906, would have caused insured losses of $96 billion, were the quake to hit under current economic and demographic conditions, according to AIR Worldwide.

THE TEN MOST COSTLY U.S. EARTHQUAKES BY INFLATION-ADJUSTED INSURED LOSSES (1)

($ millions)

        Insured losses (2)  
Rank Date Location Overall losses when occurred When occurred In 2013 dollars (3) Fatalities
1 Jan. 17, 1994 California: Northridge, Los Angeles, San Fernando Valley, Ventura, Orange $44,000 $15,300 $24,050 61
2 Apr. 18, 1906 California: San Francisco, Santa Rosa, San Jose 524 180 4,240 (4) 3,000
3 Oct. 17, 1989 California: Loma Prieta, Santa Cruz, San Francisco, Oakland, Berkeley, Silicon Valley 10,000 960 1,800 68
4 Feb. 28, 2001 Washington: Olympia, Seattle, Tacoma; Oregon 2,000 300 395 1
5 Mar. 27-28, 1964 Alaska: Anchorage, Kodiak Island, Seward, Valdez, Portage, Whittier, Cordova, Homer, Seldovia; Hawaii; includes tsunami 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 75 155 8
8 Apr. 4, 2010 California: San Diego, Calexico, El Centro, Los Angeles, Imperial; Arizona: Phoenix, Yuma 150 100 105 NA
9 Sep. 3, 2000 California: Napa 80 50 68 NA
10 Jun. 28, 1992 California: San Bernardino 100 40 66 1

(1) Costliest U.S. earthquakes occurring from 1950 to 2013, 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 2013 dollars by Munich Re.
(4) Inflation-adjusted to 2013 dollars based on 1913 Bureau of Labor Statistics data (earliest year available).

NA=Data not available.

Source: © 2014 Munich Re, Geo Risks Research, NatCatSERVICE.

Unfortunately, a 2014 I.I.I. survey reveals that only 7 percent of homeowners nationwide report having earthquake coverage, down from 10 percent last year. In the West, 10 percent have earthquake coverage, down from 22 percent in 2013. Seven percent have coverage in the Midwest, and in the South the proportion of homeowners with earthquake coverage stood firm at 6 percent. Only 2 percent of homeowners in the Northeast had coverage.

 

Even in California—where nine of the most costly earthquakes in the last century occurred—only 12 percent of residents purchased coverage. This is down from 30 percent in 1996, two years after the 1994 Northridge, California, earthquake—the most costly in U.S. history. It caused an estimated $44 billion in total property damage, including $15.3 billion in insured losses, $24.1 billion in 2013 dollars. The Northridge earthquake is the fifth most costly insured U.S. disaster.

 

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 generally provided by standard homeowners and renters insurance policies. Earthquake coverage is available from private insurance companies. In California, coverage is also available from the California Earthquake Authority (CEA), a privately funded, publicly managed organization.

 

Earthquake insurance carries a deductible, generally in the form of a percentage rather than a dollar amount. Deductibles can range anywhere from 2 percent to 20 percent of the replacement value of the structure. This means that if it costs $100,000 to rebuild a home and there was a 2 percent deductible, the owner would be responsible for the first $2,000 dollars. Insurers in states with a higher than average risk of earthquakes, such as Washington, Nevada and Utah, often set minimum deductibles at around 10 percent. In most cases, consumers can get even higher deductibles to save money on earthquake premiums. The standard CEA policy includes a deductible that is 15 percent of the home’s replacement cost.

 

Cars and other vehicles are covered for earthquake damage under the optional comprehensive portion of an auto insurance policy. 

 

The following I.I.I. staff will be available via cell phone and email this weekend to answer questions and provide interviews:

 

Dr. Robert Hartwig, CPCU
President of the I.I.I. and economist: 917-453-1885; bobh@iii.org

 

Michael Barry
Vice President, Media Relations: 917-923-8245; michaelb@iii.org

 

Loretta Worters
Vice President, Communications: 917-620-0982; lorettaw@iii.org

 

Bill Davis (Georgia)
Southeastern Media Representative: 770-331-9279; billjoe@bellsouth.net

 

Elianne González (Florida)
Hispanic Press Officer: 954-684-4410; elianneg@iii.org

 

Lynne McChristian (Florida)
Media Representative:  813-480-6446; lynnem@iii.org

 

RELATED LINKS

Issues Update:  Earthquakes: Risk and Insurance Issues

Facts and Statistics: Earthquakes and Tsunamis

 

The I.I.I. has a full library of educational videos on its You Tube Channel. Information about I.I.I. mobile apps can be found here.

THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY. Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500; www.iii.org