California Quake Risk

Yesterday’s magnitude 5.4 earthquake that struck 35 miles east of downtown Los Angeles is a reminder of the heightened risk faced in California and the importance of having earthquake insurance. The majority of the most costly earthquakes in U.S. history have occurred in California. Standard homeowners and business insurance policies in the U.S. do not cover earthquakes, but coverage is available via an endorsement. In California, coverage is available from private insurers and from the privately financed, publicly managed California Earthquake Authority (CEA). The CEA is the largest residential earthquake insurer in the state, with $498.5 million in direct premiums written in 2007, accounting for 32 percent of the market.  

Persuading people to buy earthquake insurance remains a key challenge; only about 12 percent of homeowners in California buy it. Yet the risk is significant. Earlier this year scientists unveiled a scenario for a magnitude 7.8 earthquake along the San Andreas fault in southern California. The ShakeOut scenario estimates this earthquake would cause some 2,000 fatalities, 50,000 injuries, and $200 billion in damage and other losses. A preparedness week planned for mid-November will include the largest earthquake drill in U.S. history. Check out further I.I.I. facts and stats on earthquake coverage and the CEA.  

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