When the earth shakes, it gets our attention.

With respect to earthquake insurance, for example, an Oklahomainsurance-department spokesperson recently told Reuters thattake-up rates in the state grew after a magnitude 5.6 quakestruck in 2011, from up to 4% before the temblor struck to up to18% currently. Figures from the Insurance Information Instituteshow direct-written premium for earthquake in the state grew from$6.76 million in 2010 before the quake to $11.63 million in2012.

But the reverse is also true: When an area at risk forearthquakes does not experience one for an extended period of time,this risk falls off the radar for most people and even publicofficials.

Insurance in California

Earthquake insurance take-up rates may not be the best measureof an area's preparedness for and awareness of the risk, as thereare cost/benefit factors at play. Residents in California, forexample, would all likely say they want to be protected againstearthquakes, but the take-up rate among personal-lines consumers isdismally low at around 10%.

John Preli, earthquake and terrorism underwriting manager for FMGlobal, speaks from his experience living there: “I lived incalifornia for many years. I didn't buy earthquake insurance,” hesays. “Number one, because my assets were not that great, andnumber two, the terms and conditions were such that I didn't feel Iwas getting a lot for my money by purchasing it.” Deductibles arehigh and the coverage can be costly, he notes.

He adds, “That was post Northridge [the 1994 quake that struckthe San Fernando Valley]. Pre Northridge, I think a lot of peoplebought earthquake insurance and you had quite a few companies goout of business in the 30 seconds that it shook.”

For commercial-lines insurance, Preli says whether a businesswill purchase earthquake coverage is “largely dependent on acompany's risk tolerance, which varies depending on a myriad offactors,” such as who the company's customers are and whatrequirements a company's board sets.

“You can have the best-protected building and plant in operationthat would have minimal damage [from an earthquake], but the boardof directors still requires purchase,” Preli says. “And the exactopposite could happen.”

A company will generally factor in its mitigation measures andits annual insurance budget. Preli says.

Insurers, too, have considerations. Preli notes an earthquakeswill not just impact one insured in a given area, but rather manyat once. “We have to balance exposure with risk appetite,” hesays.

Like personal-lines, Preli says commercial earthquake insuranceis normally a separate coverage purchased with its own limit anddeductible. Many commercial policies, he says, will includecoverage for everything that can happen during an earthquake:shaking, a resulting fire and water damage from sprinklers goingoff or from a levee break or tsunami.

As for FM Global, he says earthquake coverage is part of a suiteof perils covered under “earth movement.” Losses from sinkholes,volcanoes and landslides also fall under earth movement, he says. Aresulting fire and water damage would fall under aseparate fire coverage, and flood from earthquake andtsunami would also be covered under its own separate policy.Each policy, Preli says, offers separate limits, and therefore moreoverall coverage, and has separate deductibles.

Preparedness beyond insurance

While many recent stories since the Napa earthquake have focusedon the low insurance take-up rate in the state, California leadsthe way in the U.S. for preparedness in other areas.

“California has highly developed earthquake building codes,”says Harold Magistrale, senior lead research specialist at FMGlobal, who is the technical team leader for all of the company'sgeological sciences research.

New buildings, he says, have to be built to modern earthquakestandards—ensuring they either have flexibility or that some partof the building can absorb earthquake energy without falling down.Even many older buildings in California are retrofitted to beearthquake resistant, Magistrale says, which involves tyingtogether all structural elements: Walls to foundation; roof andfloor to walls.

Magistrale and Preli both note, though, that even structuresbuilt to code are designed with the idea of saving lives; notnecessarily limiting property damage. Any building, they say, maynot be available to use after a quake.

The recent earthquake and how buildingsperformed

How do buildings perform when they're built to code orretrofitted to withstand earthquakes? The recent Napa earthquake isinstructive. As is usually the case, images of the earthquake'saftermath focused on the damage done to buildings and the contentswithin. But for Magistrale and Preli, who have been around a lot ofearthquake-damaged areas, the scene was what they expected: bricksand cinderblocks were among much of the rubble discovered, frombuildings not designed to withstand earthquakes.

“The kind of damage that we've seen in the pictures from thisearthquake looks pretty typical,” Magistrale says. “The kinds ofthings that broke are the kinds of things you expect to break.”

Preli adds he is not aware of any well-designed building in thearea suffering any significant structural loss. What's inside thebuildings is another matter. Preli notes that many images in thenews focused on ruined barrels after the Napa earthquake, but ifthese barrels are stacked when the earth shakes, then such damageis to be expected and does not reflect the resistance of thebuildings they were in.

If it works, why doesn't everyone do it?

With the success during earthquakes of structures built to codein California and elsewhere, it would seem to make sense for allareas at risk to adopt and enforce similar codes. But that is notthe case, and as the saying goes, “Out of sight, out of mind.”

Says Preli, “There are many jurisdictions—countries, counties,states—that have fabulous seismic codes, but they're either notmandatory or they're not enforced. So it's a mixed bag.”

Magistrale points out that the best-prepared areas are,unsurprisingly, those that have experienced earthquakes in therecent past and have had time to absorb lessons and put thoselessons to practical use. He cites California and Japan as twoexamples.

But risks are present elsewhere, even in the U.S. The New Madridfault line, for example, experienced four earthquakes of magnitude7 or higher between December 1811 and January 1812, and thethinking is that the New Madrid system is indeed active.

“Some geologic investigations found evidence of previousearthquakes in that area,” Magistrale says, noting that the NewMadrid fault line shows up on both the USGS national seismic hazardmap and on FM Global's earthquake risk-zone maps.

Yet, Magistrale says, areas along the fault line do not takebuilding codes very seriously.

Preli adds that the New Madrid system includes a big area,across many states, each with different codes and different levelsof enforcement.

Studying faults in such an area, Magistrale notes, is moredifficult than studying the San Andreas fault line. The New Madridsystem is in the middle of the continent, and the faults that causeearthquakes are buried deeper, while the San Andreas system isalong a plate boundary, making access and observation mucheasier.

Still, even if studying the New Madrid system was easier,Magistrale does not believe the information gained would impactpreparedness there. “It's not the level of investigation thatdetermines preparedness,” he says, “but time since lastearthquake.”

He notes there is typically a big spike in interest shortlyafter an earthquake, but that interest then falls back down tozero. “In New Madrid,” he says, “it's been over 200 years” sincethe major earthquakes there. “There's no cultural memory of dealingwith it.”

In California, by contrast, as this week's event shows, “you getreminders.”