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Earthquakes in 2010 caused insured losses exceeding $10 billion, and the industry as well as governments around the world must take action to prepare for future quakes, according to a new report from catastrophe modeler EQECAT.
Economic losses from the 2010 quakes are estimated at $40 billion, EQECAT said.
The February 2010 Chile earthquake—a magnitude 8.8 quake—was the costliest for the year, causing insured losses of $8 billion and economic losses of $30 billion, EQECAT said in the report, "Earthquakes in Review: A Foundation for Understanding Risk," prepared by Kate Stillwell. The January quake in Haiti caused the greatest loss of lives since a magnitude 7.5 earthquake in 1976 in Tangshan, China.
Other major 2010 earthquakes included a magnitude 7.2 April event in Baja California, Mexico, and a magnitude 7.1 September event in New Zealand, which cuased insured losses of $3 billion.
EQECAT said these events have provided new sources of data for modelers. For example, EQECAT said the Chile earthquake provided insight into how many locations in the U.S. and other developed nations might fare from a similar event. “The Pacific Northwest has a particularly similar seismotectonic setting and level of preparation,” according to the report.
EQECAT said scientists at the Southern California Earthquake Center have produced simulations showing that a magnitude 8 quake along the southern San Andreas fault could cause reverberations lasting up to six minutes in the Los Angeles basin and cause economic losses exceeding $600 billion.
A 2005 report from the Japanese government noted that a magnitude 7.3 quake in Tokyo could cause economic losses just under $1 trillion.
Despite these high loss estimates, EQECAT said financial preparation in these developed economies is “surprisingly modest.” In California, the report notes only 12 percent of homes are insured against earthquake damage. In Japan, the number drops to under 10 percent.
EQECAT said, “Preventing economic downturn from following a natural disaster will require continued investment in public infrastructure as well as creative ways to improve insurance penetration and provide credible financial backstops.”
EQECAT noted that broad earthquake coverage in New Zealand is a major factor supporting estimates that the 2010 quake there is likely to spur, rather than hamper, overall economic development.
Less developed cities at risk include capital cities in Central and South America, as well as cities along the Himalayan front and along the Pacific trenches. “Not only are these regions less financially resilient than the U.S. and Japan, but there is less overall awareness of seismic risk and less earthquake preparation,” EQECAT said.
The catastrophe modeler recommended public awareness campaigns in these regions as well as “coordinated, long-term commitment from the insurance industry—working in collaboration with public entities—to create instruments that provide immediate liquidity for recovery.”