The Risks of Hazard

Recently, I’ve explored in this blog the potential earthquakes in the New Madrid and Cascadia seismic zones. (By the way…little rumblings in New Madrid this week.) One of the main points of those blog posts was how underinsured the property is in those regions, where the seismic risk is possibly underappreciated. Let’s take a look at California, where everyone knows a big earthquake is going to happen; including the USGS, which suggests California has more than a 99% chance of having a magnitude 6.7 or larger earthquake within the next 30 years.

A few weeks ago, I wrote about the New Madrid seismic zone, including how an earthquake there would be the costliest natural disaster in the country’s history. In those two weeks, the readership of that blog post has been enormous (thanks to Iain Bailey at Swiss Re for the original article!), and along with it came many questions and comments that mention the Cascadia subduction zone. So, let’s explore that seismic time bomb, including a comparison with New Madrid.

Until the 70s and 80s, the Cascadia subduction zone was unknown to science. Thanks to a July 2015 article in the New Yorker by Kathryn Schulz, it now has a high profile in the public consciousness. The article recounts the scientific detective story around its discovery, and describes the potential destruction to be wrought when (not if) the earthquake comes. It’s a fantastic – and very scary – article, and it has made the rounds of social and traditional media.

What are the similarities between the two seismic zones? Not much, beyond their shared potential for devastation (human and economic) of large populations.

The differences are more interesting.

Swiss Re published a paper describing a potential natural catastrophe that would be the costliest nat cat event in U.S. (and, ipso facto, global) history. Other publications are picking it up for obvious reasons, including Insurance Journal and Carrier Management. The first surprise of many who read the paper is the event they are describing: Midwest earthquake.

Really?

This final blog post introducing earthquake risk and analytics explores a common accompaniment to earthquake: tsunami. This is an interesting peril because it's actually a combination of two perils — earthquake and flood. Tsunami is the surging flood from the ocean caused by sudden seabed vertical displacement (or, rarely, it can be caused by a huge landslide). The earthquake may or may not cause damage on a nearby coast, but the huge volume of water hitting coastal areas at high velocity causes intense damage — frequently complete destruction.

In my previous post, I explored the two earthquake metrics that help insurers understand the likelihood of an earthquake affecting a specific location. This post is about the two metrics that express the severity of property damage in the event an earthquake does occur.

Unlike the science behind earthquake forecasting, which has limited capabilities, the science behind the civil engineering that enables buildings and structures to withstand earthquakes is well developed. Insurance analytics and earthquake models leverage this engineering know-how to estimate potential damage (or vulnerability, to use the modeling term) for a given building.