Canadian Underwriter

Eastern Canada has high earthquake exposure, little awareness: Swiss Re

July 12, 2017   by Staff

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 Photo copyright: are more likely to associate earthquake risk with British Columbia than eastern Canada but although the average magnitude of quakes in the east is likely smaller, the consequences would be devastating, states a study from Swiss Re released on Tuesday.

The region around southern Quebec and Eastern Ontario is home to significant seismic activity, says the study. As well, 70% of the population of Quebec lives in a seismic area, as do three of the country’s largest cities: Montreal, Ottawa and Quebec City. The study, entitled Earthquake risk in eastern Canada: mind the shakes, says the potential loss associated with an earthquake would be in the billions.

Related: Quake that hit parts of Canada shines spotlight on earthquake insurance

For example, a 7.3 magnitude quake near Quebec City would result in property loss of up to $10.6 billion, says the insurer. “And a repeat today of the magnitude 5.8 earthquake in the city of Montreal in 1732 would lead to even higher losses, estimated at $45 billion,” the report continues–with the majority of those losses being uninsured.

Since many Canadians don’t associate earthquakes with the eastern provinces, earthquake insurance penetration is just 3.4%, says the study, compared to 65% in Vancouver and Victoria. “The low level of insurance leaves households in Quebec and eastern Ontario exposed to potentially significant losses from property damage and disruption to overall economic activity should an earthquake strike.”

The main reason why homeowners in eastern Ontario and Quebec are uninsured “is lack of awareness of the risk that earthquakes pose, which drives the relatively low value placed on buying protection. It does not help that there is not much public discussion of the hazard,” the report continues.

Swiss Re says insurers need to do more to address the need for earthquake protection in the eastern part of the country, as “according to Natural Resources Canada, there is between 5 and 15% probability that a quake strong enough to cause damage in the Montreal, Ottawa and Quebec City regions will happen within 50 years.”

Related: Possibility of a “big shake” requires big moves by P&C industry: senator

In addition to causing billions in uninsured property damage loss, an earthquake in an unprepared region would cause economic disruption, which can result in loss of employment and income, Swiss Re says. “If no back-up plans exist, or when plans are not based on cascading event scenarios, damage to physical assets can reduce productive capacity, while damage to critical infrastructure such as roads and utilities can disrupt logistics and other operations.”

If an earthquake occurred in the Quebec region today like it has in the past, Swiss Re says it would be a wake up call. “In addition to risk of injury and death from lack of preparedness and scenario planning, many people could experience severe financial difficulties due to inadequate earthquake insurance coverage.”

The full study is available through Swiss Re’s website.


This story was originally published by Canadian Insurance Top Broker.