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Canadian Earthquake Offers Critical Reminder of U.S. Vulnerability to This Type of Disaster

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Majority of Homeowners in States Most Vulnerable to Earthquakes Have Not Purchased Earthquake Coverage, Says I.I.I.

NEW YORK, June 25, 2010 — The 5.0 earthquake that struck the Ontario-Quebec border region of Canada and was felt in Vermont, parts of upstate New York and as far away as Ohio, Illinois and Indiana on Wednesday, June 23, is a stark reminder of the vulnerability of the United States to this type of disaster.
 
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 not have been built or upgraded to current building codes.
 
Compounding this problem is the fact that the vast majority of homeowners living in seismic zones do not purchase earthquake insurance, according to the Insurance Information Institute (I.I.I.). In fact, only 12 percent of California homeowners, the U.S. state most at risk of a major earthquake, have earthquake coverage. And even fewer homeowners in other states have the coverage.

EARTHQUAKES AND INSURANCE

Earthquakes are not covered under standard U.S. homeowners or business insurance policies. Coverage is usually available for earthquake damage in the form of a supplemental policy to homeowners or business insurance. Standard homeowners and business insurance policies may, however, cover losses from a fire following an earthquake, which would include additional living expenses and business interruption coverage. Cars and other vehicles are covered for earthquake damage under the optional comprehensive portion of an auto insurance policy.
 
Earthquake insurance policies often carry 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 structure's replacement value. This means that if it costs $100,000 to rebuild a home and the policy has a 2 percent deductible, the policyholder would be responsible for paying the first $2,000.
 
In California, homeowners can also secure coverage from the California Earthquake Authority (CEA), a privately funded, publicly managed organization. The CEA offers homeowners dwelling coverage deductibles of either 10 or 15 percent. The CEA coverage limit is the insured value of the home as stated on the companion homeowners insurance policy.
 
Earthquake insurance premium rates are determined differently by each insurance company and can vary widely depending on several factors, such as the location of the building, the construction materials used in its construction as well as the proximity to a fault line.

U.S. EARTHQUAKE HISTORY

Since 1900, earthquakes have occurred in 39 U.S. states. Minor earthquakes, for instance, struck states such as Illinois and Nevada in 2008. According to the U.S. Geological Survey (USGS), the largest earthquake in New York state, was 5.8 on September 5, 1944, and was felt from Canada south to Maryland and from Maine west to Indiana. The last major quake on the U.S. mainland was the 6.7 magnitude Northridge, California event in 1994.
 
A huge quake is more likely in Southern California than in Northern California over the next 30 years, according to a 2008 study compiled by experts from the USGS, USC's Southern California Earthquake Center and the California Geological Survey. The study also predicted, in looking at the 30-year probability of one or more events greater than or equal to the magnitude of the Northridge quake hitting California, that there is a 99 percent chance that at least one earthquake meeting that criterion will occur.
 
The 1994 Northridge earthquake and the 1989 6.9 magnitude Loma Prieta quake that struck the Oakland-San Francisco area during that year’s World Series were the two most costly earthquakes in U.S. history, as defined by insured losses. In 2009 dollars, Northridge caused an estimated $22 billion in insured losses and approximately $22 billion in economic losses while the Loma Prieta quake resulted in $1.6 billion in insured losses and $8.3 billion in economic losses.
 
Yet, almost 16 years after 1994’s Northridge, California, earthquake, only about one in eight California residents has their home or business insured for property losses in the event of a quake, the Insurance Information Network of California (IINC) estimates.

THE TEN MOST COSTLY U.S. EARTHQUAKES (1)

($ millions)

        Insured losses       
Ranked by insured losses when occurred Date Location Overall losses when occurred When occurred In 2009 dollars (2) Fatalities Ranked by insured losses in 2009 dollars
1 Jan. 17, 1994 California: Northridge, Los Angeles, San Fernando Valley, Ventura, Orange $44,000 $15,300 $22,200 60 1
2 Oct. 17, 1989 California: Loma Prieta, Santa Cruz, San Francisco, Oakland, Berkeley, Silicon Valley 10,000 960 1,660 70 3
3 Feb. 28, 2001 Washington: Olympia, Seattle, Tacoma; OR 2,000 305 370 1 5
4 Apr. 18, 1906 California: San Francisco, Santa Rosa, San Jose 524 180 3,901 (3) 3,000 2
5 Oct. 1-4, 1987 California: Los Angeles, Whittier 358 73 138 8 6
6 Oct. 15, 2006 Hawaii: Big Island, Kailua Kona, Oahu, Honolulu 200 50 53 NA 9
7 Sept. 3, 2000 California: Napa 80 50 62 NA 7
8 Mar. 27-28, 1964 Alaska: Anchorage, Kodiak Island, Seward, Valdez, Portage, Whittier, Cordova, Homer, Seldovia; Hawaii 540 45 312 130 4
9 Dec. 22, 2003 California: Paso Robles, San Simeon, San Luis Obispo, Atascadero 200 40 47 2 10
10 Jun. 28, 1992 California: San Bernardino County 100 40 61 1 8





(1) Costliest U.S. earthquakes occurring from 1900 to 2009, based on insured losses when occurred.
(2) Adjusted to 2009 dollars by Munich Re.
(3) Adjusted to 2009 dollars by the Insurance Information Institute based on 1913 Bureau of Labor Statistics data (earliest year available).

NA=Data not available.
Source: © 2010 Munich Re, Geo Risks Research, NatCatSERVICE.

 

 

 

NORTHEAST EARTHQUAKE HISTORY

Potential earthquake losses, when annualized, add up to about $4.4 billion dollars a year, and the Northeast ranks third in the nation for annualized losses, according to a study by the Federal Emergency Management Agency (FEMA).
 
Northeast cities ranked among the top 40 high-loss potential urban areas including New York and Boston. Earthquake loss estimates are annualized to factor in historic patterns of frequent smaller earthquakes with infrequent but larger events. The $4.4 billion annual estimate is extremely conservative and includes only capital losses to buildings and business interruption losses. It does not include damage and losses to critical facilities, transportation, utility lifelines or indirect economic losses.
 
The average person may not associate earthquakes with the eastern portion of the United States, yet according to the Northeast States Emergency Consortium (NESEC), some of the largest seismic events have occurred east of the Rocky Mountains. In fact, the recorded history of earthquakes in the New World began shortly after the Pilgrims landed, when in 1638, a damaging earthquake rocked Plymouth Colony.
 
The first well documented, damaging earthquake to affect New Hampshire occurred the night of October 29, 1727. This earthquake, with its epicenter located off the New Hampshire and Massachusetts coast, caused damage from Boston, Massachusetts to Portland, Maine. Brick buildings “shattered” in Haverhill, Massachusetts, chimneys toppled and large quantities of sand were ejected from the ground in Newbury, Massachusetts and in Hampton, New Hampshire.
 
Twenty-eight years later there occurred the Cape Ann Earthquake. This earthquake, with an estimated magnitude of 6.0, caused widespread damage along coastal New England on the night of November 18, 1755.

 

NORTHEAST EARTHQUAKE FACTS

  • The cities in the Northeast are among the most densely populated areas in the United States, placing more people at risk in the event of an earthquake.
  • The area impacted by an earthquake in the Northeast can be up to 40 times greater than the same magnitude event occurring on the West coast due to regional geology.
  • Approximately 40-50 earthquakes are detected annually in the Northeast.
  • The Northeast is home to many older and historic structures that are not designed to withstand the impact of an earthquake.
  • Many older structures in the Northeast, such as schools, hospitals and fire stations, are built of unreinforced masonry (i.e., “red brick”) and are particularly vulnerable to damage or collapse in the event of an earthquake.
  • Most states in the Northeast have adopted some seismic provisions into their state building codes for certain types of new construction. However, the coverage, scope and enforcement of these codes varies by state and community.
  • Unlike other areas of the country where earthquakes occur along known fault lines (e.g., California), Northeast earthquakes do not correlate with the many known faults that exist in the region.
  • While there are many uncertainties about what causes earthquakes in the Northeast, one thing is certain: earthquakes will continue to occur in this region. 
For more information about the Canadian earthquake, contact the I.I.I. at 212-346-5500 or IINC at 213-624-4462.
 

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