A Matter of Time

At about 9 p.m. on January 26, 1700, the largest earthquake known to have struck Canada occurred off the west coast of North America. A massive “megathrust” earthquake with an estimated magnitude of 8.7 to 9.2 ruptured some 1,000 kilometres of the Cascadia Subduction Zone, from California to Vancouver Island.

The ground shook so violently – and for so long – on Vancouver Island that homes were destroyed and people could not stand. The quake caused ground along the coast of Vancouver Island to permanently drop around one and a half metres and triggered extensive landslides. It also unleashed a tremendous tsunami that struck Japan a few hours later with waves two to three metres high.

A BETTER UNDERSTANDING

Vivid memories of the 1700 Cascadia earthquake are preserved in the oral traditions of Vancouver Island’s First Nations peoples, and the event left clear geological evidence, but it is not part of modern Canada’s historical experience. It occurred before European settlers reached the area and is only documented in Japanese records of a mysterious tsunami.

Only recently have these accounts been associated with the actual Cascadia event, enabling its date and magnitude to be estimated.

Not that long ago, few believed that the Cascadia Subduction Zone was capable of producing extreme earthquakes, but the last few decades of research has added enormously to understanding of seismicity in Canada. It is now known that M9.0 or greater quakes sporadically rupture the entire length of the subduction zone, with an average return period of 500 years or longer. Recent findings indicate more frequent ruptures of smaller magnitude earthquakes (down to M8) in the southern part of the subduction zone.

The region in which the 1700 Cascadia earthquake occurred is part of the Pacific Rim, around which about 81% of the world’s largest earthquakes occur. Canada’s segment of this so-called “Ring of Fire” generates the majority of the country’s earthquakes, but there is a second seismic hotspot along the Ottawa and St. Lawrence valleys. Quakes are less frequent here than on the west coast, and less powerful, yet large and damaging events have occurred in the past and are likely to do so again in the future. Natural Resources Canada suggests there is at least a 5% to 15% chance that a strong earthquake will strike here in the next 50 years.

GROWING EXPOSURE

Canada is no stranger to earthquakes – they happen all the time – but most are too slight to cause damage or occur in remote and sparsely populated areas. From a geological perspective, a very brief span of time has elapsed since European settlers arrived on the east coast in the 1500s. Canada has since developed into one of the largest advanced economies in the world, and its growing exposure has contributed to escalating insured losses from a wide range of natural catastrophes.

The damaging earthquakes that the country has experienced in the past, although each was considered destructive and costly at the time, impacted a comparatively small population and a limited range of property – much of which was uninsured. Modern Canada has experienced nothing on the scale of the 1700 Cascadia earthquake and has yet to be impacted by the full range of possible seismic events.

Despite Canada’s vast area, approximately 80% of its 35 million inhabitants live within 150 kilometres of the United States border. About half of these people live in the conurbations of the Lower Mainland of British Columbia and the Québec City-Windsor corridor. A report published by the Institute for Catastrophic Loss Reduction notes that the intersection of these two major concentrations of exposure with the country’s most earthquake-prone regions accounts for 75% of Canada’s seismic vulnerability.

Massive offshore quakes like that of the 1700 event happen very rarely, but less powerful inland temblors are more frequent. Because they can occur close to urban areas, they are considered by many to be more hazardous.

A really significant earthquake has yet to strike one of the major concentrations of insured property found today in the highly developed areas around Vancouver, Montreal and Québec City. It is only a matter of time before one does.

SHAKE, RATTLE AND A ROLL CALL OF SUB-PERILS

While ground-shaking is the principal cause of insured loss arising from earthquake events, it is far from being the only one. The devastating earthquakes that struck Japan (M9.0 in 2011), Chile (M8.8 in 2010) and New Zealand (M7.0 in 2010 and M6.1 in 2011) dramatically highlighted the major losses that can be associated with the sub-perils of tsunami, fire following, landslide and liquefaction. Each of these sub-perils is capable of contributing significantly to earthquake-related losses in Canada.

The Cascadia earthquake of 1700 demonstrates that large subduction zone earthquakes can generate powerful tsunamis. The damage these cause can be significant at coastal locations, which feature exposure at low elevation.

The presence of coastal flood defences, such as seawalls, can significantly reduce tsunami damage if they are of sufficient height and remain structurally sound during the tsunami.

Despite the shelter provided by Vancouver Island, low-lying coastal areas in the vicinity of Vancouver are at risk.

Outbreaks of fire often follow earthquakes because of overturned household appliances and damage to electrical wiring, power lines and gas pipelines. Earthquake damage to roads and water distribution pipelines may significantly hamper fire suppression efforts, and wind conditions may cause relatively small fires in areas of dense development to spread from structure to structure and grow into a conflagration.

To take an extreme example, the fires that engulfed San Francisco in 1906 caused more death and destruction than the earthquake that preceded them.

Earthquake-triggered landslides place infrastructure, homes and other exposures in Canada’s mountainous regions – such as the Southern Coast Mountains of British Columbia and southern parts of Vancouver Island – at risk and have a direct impact on the social and economic life of the hazard region. If an earthquake were to strike, landslide damage to power lines and pipelines would have far-reaching effects, even if other structures escape serious damage. Blocked roads or railroads can have a considerable impact on business interruption.

Liquefaction occurs when violent ground-shaking causes water-saturated soils to lose their strength, which can cause buildings to suddenly tilt or even topple over. Buried utility lines, pipelines and ducts can rupture or surface.

Liquefaction is more likely in areas with loose coarse-grained soils that have poor drainage. An example would be loose sands, which are found along riverbeds, beaches, dunes and other areas where sands have accumulated.

A prime example is the Fraser River Delta area in Vancouver, where the municipality of Richmond, i
n particular, is susceptible to damage from liquefaction.

OWN YOUR RISK

If the 1700 Cascadia earthquake were to happen today, it would cause tens of billions of dollars in insured losses. Greater knowledge of Canada’s seismic activity and a deeper appreciation of the extent of exposure in harm’s way have contributed to a heightened awareness of the risk and questions about the insurance

industry’s preparedness for extreme earthquake events.

In 2013, the Insurance Bureau of Canada, in partnership with catastrophe risk modelling company AIR Worldwide, published a study that found the country is not sufficiently prepared for the financial impact of large earthquake striking a major metropolitan area.

Canada’s insurance regulators are likewise concerned. The Office of the Superintendent of Financial Institutions recently updated its Guideline B-9: Earthquake Exposure Sound Practices, which lays out principles that insurance companies are expected to follow in managing their earthquake risk. A key requirement for compliance is for companies to demonstrate prudent use of earthquake models in calculating their probable maximum losses (PMLs) and a thorough understanding of modelling methodologies and uncertainties.

Probabilistic modelling is critical for preparing for low-frequency, high-severity events. Models enable not just the estimation of potential losses, but also inform exposure accumulation management, actuarially sound ratemaking, portfolio management and reinsurance purchasing.

A comprehensive view of earthquake risk requires the most up-to-date understanding of seismicity and building vulnerability in Canada, and the ability to model all earthquake-related perils: ground-shaking, tsunami, fire following, landslide and liquefaction.

It is only a matter of time before the next big earthquake strikes, but companies can improve their risk management practices now to prepare for the inevitable.

On January 23, Canadian Underwriter and AIR Worldwide hosted a free live webinar presentation, Canada Earthquake Risk: From Science to Compliance, which is archived.