This story is reprinted with permission from FC&S Legal, the industry'sonly comprehensive digital resource designed for insurancecoverage law professionals. Visit the website to subscribe.
|A magnitude 7.0 earthquake along the Hayward fault under the SanFrancisco East Bay followed by 16 aftershocks ranging in magnitudefrom 5.0 to 6.4 could result in more than 1.1 million homessustaining visible damage, with a smaller number expected to befunctionally impaired.
|Related: It's time to talk to your insureds about earthquakecoverage
|Total damage to private property for the entire scenario isestimated to be about $170 billion, with only a small fraction ofdamages insured, according to a new report by CoreLogic.
Low purchase rate of earthquake insurance
In a statement, CoreLogic estimated insurance payments toproperty owners of approximately $30 billion, less than 20% of theoverall damage, primarily due to the low purchase rate ofearthquake insurance.
|Related: Earthquake impact could double for Northern andSouthern California
|The $140 billion financing shortfall presents a real risk toeffective regional recovery, in the company's opinion. It addedthat the potential for systemic impacts triggered by the lack ofinsurance was a particular concern as a significant portion of theproperty that would be damaged by the earthquake serves ascollateral for property mortgages.
'Realistic portrayal'
According to Tom Larsen, principal for industry solutionsat CoreLogic, the scenario “is not a prediction of events to come,but it is a realistic portrayal of a series of earthquakes thatcould credibly occur along the Hayward fault.”
|CoreLogic's analysis, he added, “evaluates the interactionbetween the physical aftermath of the events, with earthquakes andaftershocks occurring over time, and the financial world ofinsurance policies. Assessing that interaction can help determinehow such a catastrophic event, in conjunction with the lowpenetration rate of residential and commercial earthquakeinsurance, can have significant and long-lasting damage on thepeople and economy of the region.
|“With a better understanding and a practical planning scenariofor the effects of an earthquake, we can begin to rethink how weplan for and respond to these disasters and thus improve ourability to recover,” said Larsen.
|Related: CoreLogic releases annual Natural Hazard Riskreport for 2017
|Victoria Prussen Spears, Esq., ([email protected]) is associate directorof FC&S Legal, editor of the Insurance Coverage LawReport, and senior vice president at Meyerowitz CommunicationsInc.
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Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].
