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Quake on California’s Hayward fault ‘could produce $25 billion in insured losses,’ RMS warns


October 14, 2014   by Canadian Underwriter


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Risk Management Solutions Inc. warned Monday that the “most likely location” of the next big earthquake to affect the San Francisco Bay area is on a fault running east of the bay, which could cause $25 billion in insured losses if there is a tremor the size of one that hit the area 146 years ago.

Newark, Calif.-based RMS also warned that a magnitude 7.9 quake on the San Andreas could cause more than $200 billion in losses. All figures are in United States dollars.

“According to RMS modeling, the most likely location of the next big earthquake to impact the San Francisco Bay area is on the Hayward fault, which could reach a magnitude of 7.0,” RMS stated in a press release Monday. “A magnitude 7.0 earthquake rupturing on the Hayward fault could produce $25 billion in insured loss across residential and commercial lines of business.”

The Hayward Fault runs parallel to and east of the San Andreas Fault, according to a fact sheet published by California’s conservation department.

On Aug. 24, the Magnitude 6 South Napa earthquake – which killed at least one and is estimated to have caused more than $2 billion in economic losses – was centred between the Hayward-Rodgers and Concord-Green Valley fault systems north of San Francisco, the U.S. Geological Survey reported earlier.

Cities on the Hayward fault include Berkeley, Oakland, Hayward, Milpitas and San Jose, RMS noted Monday.

USGS reported that in October, 1868, an earthquake estimated to have measured about 6.8 to 7 on the Richter scale struck the southern end of the Hayward fault.

“Property loss was extensive and 30 people were killed,” USGS stated of the 1868 quake. “Five deaths were reported in San Francisco, out of a population of 150,000.”

Today, commercial earthquake insurance policies cover damage to buildings, contents and business interruption, RMS stated Monday.

“Substantial claims could also arise under other lines of coverages, however, such as fire, workers compensation and even general liability,” RMS said of a Magnitude 7 quake on the Hayward fault. RMS noted there is also a risk of earthquakes on other faults in the area, such as the San Andreas.

The San Andreas fault “forms a continuous narrow break in the Earth’s crust that extends from northern California southward to Cajon Pass near San Bernardino,” USGS stated, adding that 477 kilometres of that fault were ruptured during the earthquake centred near San Francisco on April 18, 1906.

A magnitude 7.9 earthquake on the San Andreas fault today could cause “cause commercial and residential property losses surpassing $200 billion,” RSM warned.

A quake of that size would have 32 times the destructive force of the Loma Prieta quake (named after a peak near its epicentre nearly 100 kilometres south of San Francisco) that killed 63 on Oct. 17, 1989. The Loma Prieta quake caused $6 billion in property damage and destroyed more than 11,000 homes, RMS added.

“Residential earthquake insurance penetration in California, which would be vital to facilitate rebuilding after an earthquake, has dropped by more than half since Loma Prieta, with only 10 percent of households currently covered,” RMS stated Monday. “While the Bay Area has become more resilient to damage from shaking, liquefaction still presents a very major risk, in particular in low-lying parts of San Francisco and Oakland.”

USGS reported that liquefaction at 134 locations “caused $99.2 million of the total earthquake loss of $5.9 billion,” after the 1989 earthquake. “Liquefaction of floodplain deposits and sandy artificial fills was similar in nature to that which occurred in the 1906 San Francisco earthquake and indicated that many areas remain susceptible to liquefaction damage in the San Francisco and Monterey Bay regions.”

RMS reported Oct. 13 that in the San Francisco Bay region, the population has grown 25% and the total value of residential property has increased 50%, to $1.2 trillion.


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