$165 Billion Quake Looms For Bay Area

The next big earthquake to hit the Bay Area would cause more than $165 billion in property damage but only $15.8 billion in insured loss, a catastrophe modeling expert said today.

Mary Lou Zoback, a vice president with Risk Management Solutions, provided those numbers at a news conference the Newark, Calif.-based firm held.

While it has been 140 years since a major earthquake struck the Hayward Fault that runs through the San Francisco Bay area, there is historical likelihood of another major event soon, according to a government expert.

Tom Brocher with the United States Geological Survey said research indicates that a major earthquake of 6.8 magnitude or higher strikes the Hayward Fault every 140 years on average.

He said more attention needs to be paid to earthquake preparedness, and stressed local people should practice safety drills to prepare themselves for the inevitable.

Ms. Zoback said a magnitude 7 earthquake would impact five million people in the San Francisco Bay Area, and property contents amounting to $5 trillion. In a separate statement released in conjunction with the press conference, RMS said the Hayward Fault covers six counties in California.

The economic results from such a disaster would dwarf the economic impact from Hurricane Katrina, said Ms. Zoback.

A Hayward earthquake would impact $25 billion in wages, while Katrina affected $3-to-$4 billion. There are 80,000 employers affecting 1.5 million jobs in the vicinity.

Discussing losses, Ms. Zoback said residential losses would exceed $90 billion and commercial losses would exceed $75 billion. The losses would be concentrated in Alameda County, where the fault runs directly through, heavily impacting San Francisco, but outlying areas would also be impacted.

Very little of the losses would be covered by earthquake insurance, she noted. Only $4.5 billion of the $90 billion in potential residential loss is covered, translating into 95 percent of uninsured residential loss. On the commercial side 85 percent of the $75 billion is not covered.

She said the potential of devastating loss in California from such an earthquake does not compare favorably to Katrina's $140 billion in total economic loss, where the uninsured loss was between 60 and 70 percent.

“We do not want to be another poster child like New Orleans is for Katrina or Kobe, Japan with their earthquake,” where thousands still remain homeless, said Sue Piper, a government official with the city of Oakland, Calif.

She said the city has a retrofit home program to make homes earthquake survivable, along with other programs. Few have applied for permits to retrofit their homes, she noted, but the numbers are growing. The city is looking to promote the program further.

“In the back of my head I am hearing the tick, tick, tick of a clock, because the next earthquake on the Hayward Fault is not a matter of if, but a matter of when,” said Ms. Piper. “That when is coming sooner than anticipated.”