October 31, 2008
Insurance Journal
If a magnitude 7.0 earthquake occured on California's Hayward Fault today, it would result in economic losses between $210 billion and $235 billion, with only up to $30 billion likely to be insured, according to a study by Newark, Calif.-based Risk Management Solutions (RMS).
In its study analyzing the impact of a major earthquake on the Hayward Fault, RMS said magnitude 6.8 earthquake rupturing the Southern Hayward Fault today - based on San Francisco Bay Area's 2008 population and property exposures - would result in economic losses of between $112-$122 billion, of which $11-13 billion would be insured.
Photo: Strong shaking during the 1868 Hayward Fault earthquake caused the second story of the Alameda County Courthouse in San Leandro to collapse and severely damaged the building (photo courtesy of the Bancroft Library, University of California). The inset photo shows the building before the quake (photo courtesy of San Leandro Public Library). The 1868 quake devastated several East Bay towns and caused widespread damage in the San Francisco Bay region.
On October 21, 1868, a magnitude 6.8 earthquake struck the San Francisco Bay region. Although the region was then sparsely populated, this quake on the Hayward Fault was one of the most destructive in California’s history. Recent studies show that such powerful Hayward Fault quakes have repeatedly jolted the region in the past. U.S. Geological Survey (USGS) scientists describe this fault as a tectonic time bomb, due anytime for another magnitude 6.8 to 7.0 earthquake. Because such a quake could cause hundreds of deaths, leave thousands homeless, and devastate the region’s economy, the USGS and other organizations are working together with new urgency to help prepare Bay Area communities for this certain future quake.
The study marks the anniversary of the 1868 Hayward Earthquake - which ruptured the southern section of the fault 140 years ago this month - and was conducted in collaboration with research seismologists led by the U.S. Geological Survey. The Hayward Earthquake occurred on Oct. 21, 1868, rupturing a section of the fault from Fremont to just north of Oakland and causing extensive damage to the small farming communities along the fault. Strong ground shaking and liquefaction also destroyed unreinforced masonry buildings in Oakland and San Francisco.
"More than 7 million people now live in the fault zone and surrounding areas -- over 25 times the population at the time of the 1868 earthquake," said Dr. Patricia Grossi, senior research scientist at RMS. "As the southern section of the fault has ruptured, on average, every 140 years for the past 700 years, this particular anniversary highlights the need to continue investing in both short and long-term mitigation as well as preparedness initiatives before the next event occurs."
RMS' loss estimates reflect insurance payments for residential and commercial earthquake coverage, as well as coverage for urban fires that would most likely break out following a major earthquake on the Hayward Fault. The estimates also account for the effects of '"oss amplification," including economic demand surge (shortages of builders and materials), repair delay inflation (rain damage), claims inflation (difficulties in insurer's policing claims costs), and insurance coverage expansion.
