Tag Archives: Earthquake

Northridge Still Costliest Earthquake in U.S. History

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.

Maine Earthquake Rattles New England

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.

Tsunami Preparedness

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 year’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 yesterday’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.

Japan Earthquake and Tsunami and Marine Debris

March 11, 2012Â  will mark the one-year anniversary of the Japan earthquake and tsunami. Together the quake and tsunami caused $210 billion in economic damage, an estimated $35 to $40 billion in insured losses, and 15,840 fatalities, according to Munich Re.

While the disaster hit Japan, its aftermath was felt well beyond that country’s borders. Concerns were raised worldwide over supply chain disruption, nuclear risks and tsunami damage.

Another ongoing issue of concern beyond Japan’s shores is marine debris.

According to NOAA, it’s possible that debris washed into the sea by the tsunami could arrive on shores in Alaska, Hawaii, the West Coast, and Canada over the next few years.

Over at the Marine Debris blog, a post by Nancy Wallace, Director of the NOAA Marine Debris Program, notes:

It is likely that beachgoers on the West Coast and Alaska will start noticing a gradual increase in marine debris items near-shore or on the beaches in 2013. Those on the main Hawaiian Islands might start noticing an increase closer to 2014.†

Despite the alarming news headlines, NOAA’s Wallace assures us there is no scientific estimate of how much debris the tsunami washed into the sea or how much is still floating. It is also highly unlikely any debris is radioactive, while the chance of human remains arriving with it is almost zero.

You can find out more about the Japan tsunami marine debris on the NOAA Marine Debris Program site. Resources include the informative tsunami debris FAQs and fact sheet.

There’s also a marine debris tracker app that allows you to check in when you find trash on U.S. coastlines and waterways. Significant marine debris sightings can also be reported to NOAA via email at DisasterDebris@noaa.gov

A HuffPost piece offers further analysis on the tsunami marine debris story.

New Madrid Anniversary Highlights Earthquake Risk

As you’ll see from the I.I.I. website today marks the 200th anniversary of the first of the New Madrid earthquakes.

This series of three earthquakes, the first of which occurred on December 16, 1811, with major temblors following in January and February of 1812, remain among the most powerful quakes in U.S. history (three of the earthquakes were above a magnitude 7, and there were up to 200 aftershocks of between magnitude 4 and 7).

According to the U.S. Geological Survey, a similar risk exists today in the New Madrid seismic zone, threatening eight states: Alabama, Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

That puts large cities such as Memphis, St. Louis and Nashville well within range of a large-scale New Madrid earthquake.

Recent projections by the USGS put the likelihood of a magnitude 6 or higher earthquake at about 25-50 percent over the next few decades, whereas a magnitude 7 or higher has a 10 percent chance of occurring.

As noted by the I.I.I. it’s important to remember that earthquakes are not covered under standard homeowners or business insurance policies. However, coverage is available in the form of an endorsement to a home or business insurance policy.

A wealth of additional information  is available at  the New Madrid Bicentennial website, but for residents sitting at home wondering how they can protect their home and property in the event of an earthquake, the Insurance Institute for Business  & Home Safety (IBHS) has some handy risk reduction tips.

For example, one of the most common sources of damage and injury during earthquakes in the U.S. are falling objects.

The IBHS guide “Reduce Six Common Earthquake Risks for Under $70† identifies affordable ways to secure five items commonly found in homes so that they are not shaken loose, including water heaters, wall-mounted flat panel TVs, and bookcases. Worth a read!

Earthquake Insurance: To Buy Or Not To Buy?

A series of earthquakes in Oklahoma over the weekend demonstrates that even if you don’t live in earthquake-prone California, earthquake insurance may be worth checking out.

The New York Times reports that a quake late Saturday night centered near Sparks, about 44 miles northeast of Oklahoma City, had a preliminary magnitude of 5.6, and is the strongest earthquake ever recorded in the state.

No serious injuries were reported, but it appears there was some minor damage to roads and buildings.

The quake was preceded by smaller tremors earlier in the day, including one with a preliminary magnitude of 4.7, centered in Prague, about 50 miles east of Oklahoma City, according to USGS.

Oklahoma’s earth-moving activity has scientists puzzled, according to the NYT. It cites  a research seismologist with the Oklahoma Geological Survey who  notes  that since mid-2009 the state has had 10 times more earthquakes than normal:

Unlike earthquake-prone California and Japan, Oklahoma does not rest atop the fractious areas where two tectonic plates rub against each other. But the state’s geophysical activity has only been surveyed in earnest for about 50 years, Mr. Holland said, making it difficult to draw conclusions or put the recent activity into context.

But the state does have faults that are buried deep, like the Wizetta Fault, also known as the Seminole Uplift, east of Oklahoma City, where pressure can build.†

Coming in the wake of a 5.8 magnitude earthquake in Virginia that shook the East Coast in August, the latest seismic activity in Oklahoma is a reminder that many parts of the U.S. face risks from earthquakes and that home- and business owners should reassess their need for earthquake insurance.

Earthquakes are not covered under standard U.S. homeowners or business insurance policies, but coverage is available for earthquake damage in the form of a supplemental policy.

Earthquake insurance provides protection from the shaking and cracking that can destroy buildings and personal possessions.

I.I.I. facts and statistics show that California had the highest amount of earthquake premiums in 2009, at $1.6 billion. Virginia, at 23 on the list had $10 million in earthquake premiums, while Oklahoma ranked even lower at 34 with just $4.8 million in earthquake insurance.

Turkey Earthquake

Earthquakes continue to make their mark on 2011 with the damaging 7.2 magnitude quake in eastern Turkey on Sunday that has left hundreds dead and more than 1,300 injured.

The cities of Van, where the quake was centered, and Ercis, 45km to the north, felt the brunt of the quake and hundreds of building collapses have been reported.

As PC360 reports, the insurance losses from this catastrophe should be minimal due to low insurance penetration and take-up in the impacted area.

A report from catastrophe modeling firm Eqecat puts the preliminary estimate of insured losses from this event is in the range of $100 million to $200 million. Total economic damage is estimated in the low single-digit billions of dollars.

Eqecat says:

Total economic damage is estimated at approximately one-tenth that from the 1999 M7.6 Izmit earthquake in western Turkey and 10 times the damage from the 2010 M6.1 earthquake in eastern Turkey.†

Eqecat goes on to note that insured losses will be incurred primarily by the Turkish Catastrophe Insurance Pool (TCIP), a national program of compulsory earthquake insurance for residential buildings.

The TCIP, started in 2000, is intended to minimize the rebuilding cost to the central government, and is backed by international reinsurers. Limits per policy are around $30,000, with deductibles commonly 2 percent.

However, Eqecat adds that estimates of TCIP penetration hover around 20 percent, and take-up rates in the east are less than this national average.

Eqecat’s insured loss estimate is based on much of the damage having struck residential buildings.

Damaged buildings will number in their thousands, it adds, as aftershocks  cause further  damage or collapse. Buildings in the region are a mixture of vulnerable and resistant construction.

Check out I.I.I. facts and stats on earthquakes and tsunamis.

New Zealand Aftershocks Continue

September 2010, February 2011  and now June. Christchurch, New Zealand faces yet  another setback in its recovery  after a magnitude 6.0 earthquake struck on Monday, with a reported epicenter just six miles southeast of the city’s central business district.

According to catastrophe modeling firm  Eqecat, this latest event (technically an aftershock) is expected to cause an additional $3 to $5 billion in insured losses to the region and is affecting an area already significantly damaged by earlier earthquakes.

Eqecat notes that since the magnitude 7.0 earthquake that occurred last September 3, two magnitude 6.0 events have now occurred – one on February 21 and the other  on Monday (June 13). In addition, there have been 11 magnitude 5.0 events (add one more with yet another aftershock reported earlier Wednesday).

For those of you calculating the  insured loss impact  of this series of NZ earthquakes, here’s Eqecat’s estimated tally so far:

  • M7 Darfield earthquake in September 2010: $4 to $6 billion in insured losses.
  • M6 Christchurch earthquake in February: $8 to $12 billion in additional losses.
  • And now M6 Christchurch “aftershock” in June: $3 to $5 billion.

At the low range of  Eqecat’s estimate this could mean $15 billion in insured losses, at the top end $23 billion.

Put this in the global catastrophe  context  and the latest NZ numbers add to a first-half of the year that has seen record tornado losses in the United States, the Japanese earthquake and tsunami, major flooding events in Australia  as well as  Tropical Cyclone Yasi.

And all forecasts point to the likelihood of above average activity in the 2011 Atlantic hurricane season.

A  recent article in the New York Times cited  I.I.I. president Dr. Robert Hartwig on the U.S. catastrophe loss tally. Dr. Hartwig observed that just one “relatively minor† hurricane this year could push total U.S. private insurance catastrophe losses in 2011 above the $13.6 billion paid out in 2010.

Check out I.I.I. facts and stats on global catastrophes and U.S. catastrophes.

Covering the links broken in Japan’s supply chain

Estimates of the insured loss from the Japanese earthquake and tsunami continue to roll in. They range from $12 billion (Eqecat’s low estimate) to $60 billion (London insurance analyst Barrie Cornes). Mainichi (Japan) Daily News gives a roundup.

But one of the big unknowns for insurers is what the total loss will be from various types of business interruption coverage. As I.I.I. explains, “Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire.”

That sounds simple, but it can be an enormous portion of claims after a disaster. Business interruption constituted about a third of all losses from the 9/11 terrorist attacks. Eqecat, a catastrophe modeling firm, estimated that business interruption losses would be about 20% of its Japan estimate, as the coverage is less common in Japan than in the United States.

Another type of coverage, contingent business interruption, presents a trickier wrinkle. Contingent business interruption reimburses lost profits and extra expenses when the premises of a customer or supplier suffers an interruption of business.

So a business with contingent business interruption coverage might have a claim if it depends on a Japanese supplier whose operation is shut down. And if the business has to turn to a new, more expensive supplier, the extra cost might be covered under extra expenses coverage.

A web page produced by the International Risk Management Institute (IRMI) explains details, such as:

  • Insureds can get protection against a set list of suppliers or purchase blanket coverage protecting any supplier’s shutdown.
  • The claim must be of a type that would be covered under the insured’s own policy.
  • Usually there is a time deductible (48 or 72 hours, for example). That period must expire before an insured can receive reimbursement.

The coverage is designed to protect against a prolonged interruption of the supply chain. For example, last week the Wall Street Journal reported that ON Semiconductor, out of Phoenix, Ariz, is working with insurers regarding coverage under business interruption and “supply chain disruption.”

It’s quite difficult to know how much the contingent business interruption claims will total, since a contingent business interruption claim could be filed by a company anywhere in the world. For that reason, catastrophe modelers like Eqecat don’t include contingent business interruption claims in their estimates.

Some in the industry indicate that the losses won’t be a big part of the losses from the Japan disasters. One insurance coverage attorney told the Journal that a business that itself lacks earthquake insurance might not be able to claim on its contingent business interruption. Remember, a company can only claim for a loss that would have been covered had its own property sustained it. An expert with the brokerage Aon Benfield said the claims aren’t something that “moves the needle in the insurance industry.”

And the New York Times notes that Japan’s importance in some industries, like semiconductor manufacturing, has waned in recent years as countries like South Korea, Taiwan, and China have gained market share.

I.I.I. continues to update its web page covering the Japan disasters.

Millions saved in Japan by good engineering and government building codes

As the devastation in Japan achingly unfolds, it’s easy to learn about the thousands of deaths, the piles of debris, the washed-away homes and think, “Nothing could be worse.”

But that’s not the case.

Of course, the toll is both enormous and tragic. Thousands are dead. Economists estimate the economic losses between $50 billion and $150 billion. (Insurance losses will be less, since not everything that gets damaged is insured.)

It could have been so much worse. The building codes and warning programs in place saved thousands of people and billions of dollars.

Japan enjoys some of the world’s strongest building codes to minimize the earthquake threat and has continued to strengthen them after each event.   The New York Times examined the issue shortly after the earthquake:

In Japan, where earthquakes are far more common than they are in the United States, the building codes have long been much more stringent on specific matters like how much a building may sway during a quake.

After the Kobe earthquake in 1995, which killed about 6,000 people and injured 26,000, Japan also put enormous resources into new research on protecting structures, as well as retrofitting the country’s older and more vulnerable structures. Japan has spent billions of dollars developing the most advanced technology against earthquakes and tsunamis.

Japan has gone much further than the United States in outfitting new buildings with advanced devices called base isolation pads and energy dissipation units to dampen the ground’s shaking during an earthquake.

The isolation devices are essentially giant rubber-and-steel pads that are installed at the very bottom of the excavation for a building, which then simply sits on top of the pads. The dissipation units are built into a building’s structural skeleton. They are hydraulic cylinders that elongate and contract as the building sways, sapping the motion of energy.

The Times article, written last week, also emphasized tsunami protections like regular training drills and sea walls. The swamping of Sendai makes it unclear how well those worked, but in some cases, the tsunami moved so rapidly, people had little chance to escape.

In some towns, the first waves struck within a half-hour of the earthquake, as this Wikipedia entry documents. And one standard piece of advice – get above the wave – didn’t work in towns where the high point was a building that washed away.

But the building codes seem to have done their job in the face of the largest earthquake in Japan’s long history. Although the damage is extensive, it is a far cry from the destruction last year in Haiti, where poor construction increased the death toll. The country also fared better than China did after the Sichuan earthquake in 2008. There, building codes were strong, but enforcement was lax.

Even with the post-Kobe improvements, there will be a lot of lessons coming from this month’s earthquakes, including how to protect nuclear reactors from the twin threats of earthquake and tsunami.

In the United States, the insurance industry makes sure building codes are enforced through the Building Codes Effectiveness Grading System, a job performed by the Insurance Services Office. The system got its start after Hurricane Andrew in 1992, when it became clear that Miami’s vaunted hurricane codes were spottily enforced. Buildings in highly rated areas are eligible for insurance discounts.

Meanwhile, Reuters notes that in California, newer buildings can withstand mighty quakes, but if one happens, “the surviving buildings will tower over a carpet of rubble from older structures that have collapsed.” The issue, according to Reuters: California has been lax in retrofitting older buildings.

Retrofitting was also an issue in the recent New Zealand earthquake. Recall most of the startling images – the steeple toppled from Christchurch Cathedral, for example – were older buildings in need of retrofit. In 2004, New Zealand authorities required old buildings to have one-third of the resilience of newer ones, but gave the requirement 20 years to take effect, the Wall Street Journal reported early this month.

I.I.I. continues to update its web page covering the Japan quake.