Four earthquakes in 54 days: how a New Madrid earthquake could be more of a threat than we realize

Publication draws on historical events and current methodologies to highlight unconsidered vulnerabilities.

The Midwest has earthquakes, too. The New Madrid seismic zone is often eclipsed by San Andreas fault because of its less glamorous location and lower level of seismic activity, but our research indicates it’s a potentially crippling economic threat that warrants serious consideration.

Four earthquakes in 54 days (see right) estimates potential insured losses in today’s dollars, identifies factors that contribute to those losses and suggests how to be better prepared.

A complex peril

Unlike most earthquakes, which are characterized by a main shock and smaller aftershock sequence, the New Madrid earthquakes of 1811/1812 hit the central US with a series of huge shaking events over a two month period. While records kept at the time chronicle the extraordinary effects on the landscape of a sparsely populated frontier region, there was little there to have been damaged. A vivid picture emerges when the same pattern of quakes is run through current-day models.

We calculate a series of quakes of the same magnitude today would cause USD 150bn potential loss to the insurance industry, making it the costliest natural disaster to date. Including uninsured property and assets, total damage would be over USD 300bn.

What makes the number so great?

Four earthquakes in 54 days, considers a wide array of factors - seismic, demographic and economic - that come into play when modeling a peril of this scope.

  • Seismic: The region’s large-scale geological structure allows seismic waves to travel large distances with minimal loss of energy, plus its soft soil can exacerbate the duration and intensity of seismic shaking.

  • Demographic: The area has a population of 47 million, including five major metropolitan areas, placing a wide variety of residential and commercial buildings and infrastructure in harm’s way—much of it not built to withstand a strong earthquake.

  • Economic: Beyond physical damage, businesses would lose revenue while offline for an extended period. Demand for contractors and supplies would outrun supply, causing price inflation, and the claims handling process would be complicated by disputes over things like event definitions and deductibles.

Over one-third of our insured loss estimate is attributed to the multiple effects of large earthquakes occurring one after the other, something that wouldn't be seen in a single, isolated earthquake.

Most insurers, reinsurers, rating agencies and policymakers are prepared for one large New Madrid earthquake, but it's not at all certain that they're prepared for more than one.

Our analysis points out the need for better preparation, with much of the responsibility falling to insurers: understanding their capital requirements, developing effective claims protocols and encouraging greater take-up of earthquake insurance.

Published 15 July 2015


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