High risk of further damaging earthquakes in Chile

The chances of a damaging aftershock in Chile continue to be high after the 8.8-magnitude quake that rocked the country on 27 February 2010. Powerful aftershocks could hit the region for months or even years to come. As the next underwriting period gets underway later this year, insurers and reinsurers will have to consider the heightened risk of seismic events in their analysis and planning.

Since the February earthquake, the affected areas of central Chile have already experienced well over 300 aftershocks reaching magnitudes of  5.0 or higher. This is more than triple the total number of such forceful quakes witnessed in the region over the last ten years. New aftershocks could put at risk the urban centres of Santiago and Valparaiso, home to more than half of Chile’s population and most of its property values. Even a relatively modest earthquake of magnitude 6.5 to 7.0 could cause significant damage.

The likelihood of a damaging seismic event in Chile will remain well above average throughout 2010 and 2011. Corporate risk managers and underwriters must take into account this elevated threat level. The increase of earthquake activity is due to pronounced aftershock activity after large magnitude events. While these events typically would not reach the large magnitude of the main shock, they can nevertheless reach damaging magnitude levels.

The bulk of aftershock activity is occurring in close neighbourhood of the fault region of the main shock of February 27. The largest of these aftershocks observed up to now was a magnitude 6.9 earthquake on March 11, resulting in some additional damage. From a historical experience, additional damage such as this has been typically limited, as these aftershocks affect a building stock which has to some extent already been tested.

However, the area at risk from aftershocks also extends to areas north and south of the fault tips of strong earthquakes (see Figure 1). While a lot of aftershock activity is generated from very small magnitude events, larger magnitude events can also occur. In the particular case of the February 27 earthquake, aftershocks north of the fault tip would threaten the highly industrialised Santiago and Valparaiso region with more than 50% of population and all property values of Chile. Even a smaller Magnitude earthquake of M6.5 to M7 could result in significant additional or new damages to the building stock, without being catastrophic.

Implications for managing risks

For the coming underwriting year 2010/11, the probability for seismic activity in central Chile is significantly increased over long term averages. Existing risk models used by insurance and reinsurance underwriters only take into account average, long term risk. Corporate risk managers and underwriters need to be aware of this when recalibrating their risk appetite after the large event earlier this year and take into account the temporarily increased probability of a strong earthquake in the region.

Background and method used

When a large earthquake strikes, so-called aftershocks occur during months or even years in the same area. This phenomenon is well known and researched. The size and frequency of the aftershocks and the time period over which they occur depend on the size of the main earthquake – the greater the earthquake, the larger and longer-lasting the aftershocks. As with normal earthquake activity, the increased probability for small magnitude earthquakes is by orders of magnitude higher than for larger magnitude earthquakes. Also, an aftershock would typically not reach the magnitude of the main shock.

A well known example for this is the M9.1 Indonesia earthquake from 26 December 2004. One of its aftershocks on 28 March 2005 reached a magnitude of M8.7. The increased earthquake activity in the following 5 years has lead to a 60-fold number of victims compared to the 5 years before the main earthquake. Another example is the M7.6 Turkey earthquake on 17 August 1999, which was followed by a large aftershock of magnitude M7.2 to the east of the main shock on 12 November in the same year with casualties and significant property damage.

In the case of the 27 February event: Until 23 April 2010, a number of 305 aftershocks with magnitude equal or larger than M5.0 have occurred within the source region of the Chile earthquake, whereas 21 of these aftershocks had a magnitude of at least M6.0 (see Figure 1). In comparison, during the 10-year period from January 2000 to December 2009 the same region only experienced a total number of 90 earthquakes with magnitudes equal or larger than M5.0, whereas only 10 of these events where at least of magnitude M6.0 (see Figure 1).

We have developed a quantitative estimate of the increase of seismic activity based on Omori’s Law[1] for the 36 months following the main shock on 27 February. Using this law, which has been developed on the basis of observations from other large magnitude events, it is possible to estimate the increase of probability of earthquake occurrence above the normal background rate. Note that the geographical constraint of this method is not given.

Figure 2 displays, as a sample result from our work, the increase factor in the event rate for events of at least magnitude M7 within our considered geographical area. The increase factor is the ratio of aftershock frequency and background seismicity rate and is only a relative number. The factors in Figure 2 are of such high values because the background seismicity before the M8.8 main shock has been extremely low. Even 3 years after the main shock our estimate predicts a still increased rate of seismicity, as has also been observed in the case of the Indonesia earthquake in 2004, for example.



Figure 1:
Left:
Map of all earthquakes with magnitudes equal or larger than M5.0 in the source region of the great M8.8 Chile earthquake in the time period between January 2000 and December 2009. A total number of 90 earthquakes have been observed in this magnitudes range, with 10 earthquakes showing magnitudes of at least M6.0. The highest observed magnitude was M6.7. The black rectangle represents the surface projection of the fault segment that ruptured on 27 February 2010 according to USGS[2].
Right: Map of all aftershocks with magnitudes equal or larger than M5.0 recorded within the source region until 23 April 2010. Until that day, a total of 305 aftershocks occurred. The largest aftershock had a magnitude of 6.9 and took place on March 11. The location of the M8.8 main shock is indicated by a red star.

Figure 2:
Estimated increase factor of the event rate for earthquakes with magnitudes of at least M7 for the 36 months following the M8.8 main shock on 27 February. The observed aftershocks within the first 2 following months have been used to estimate the future decay. The increase factor is defined as the ratio of aftershock frequency and background seismicity rate and is hence only a relative number. The high values for the increase factor are due to the extremely low background seismicity rate in the considered geographical area. The grey-shaded area marks the upcoming underwriting period.


[1] Utsu, T., Ogata, Y., and Matsu’ura, R.S. (1995). The centenary of the Omori formula for a decay law of aftershock activity. J. Phys. Earth 43, 1–33.

[2] U.S. Geological Survey, http://earthquake.usgs.gov/earthquakes/eqinthenews/2010/us2010tfan/finite_fault.php

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