Seismic zones need better quake insurance

Many highly seismic areas are seriously underinsured against the risk of earthquakes, according to a report released by the reinsurance company Swiss Re on Tuesday.

The report, “Lessons from recent major earthquakes”, says in the last two years several large earthquakes have caused a “devastating number of fatalities and injuries” as well as widespread damage to property.

“The cumulative catastrophic impact of earthquakes on society is overwhelming. Seismic events caused economic losses of over $276 billion [SFr 261 billion] in 2010 – 2011, yet highly earthquake-prone countries remain underinsured,” it says.

It attributes this to low risk awareness in such zones, even in some industrialised countries, and says earthquake models should take greater account of secondary loss factors.

“The low frequency of earthquake events, compared to other natural catastrophes, tends to shape the perception that earthquake risk is much lower than it actually is, even in places where there have been very deadly and damaging occurrences, like California,” said SwissRe expert Lucia Bevere, one of the co-authors of the report.

The insurance industry’s contribution to reconstruction varies considerably from one country to another. It is expected to meet some 80 per cent of the cost of the earthquake in New Zealand of February 2011,  but only 17 per cent of that of the March 2011 quake in Japan, where many commercial properties are not insured against earthquakes.

In Haiti, which suffered a devastating earthquake in 2010, causing economic damage worth 121 per cent of its gross domestic product, the insurance industry is contributing only one per cent to the cost.

Where insurance cover is insufficient, the government is obliged to pay for reparations.