Earthquake risk in eastern Canada: mind the shakes
While Western Canada is often associated with earthquake risk, the more densely populated East, which includes three of the country's biggest cities which are also in seismically active zones.
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Three of Eastern Canada's biggest cities, Montreal, Ottawa, and Quebec City are in seismically active zones.
In fact, 70% of the population of Quebec lives in seismic regions. A major earthquake could result in significant losses in an area that includes a concentration of economic assets and population. Yet most of the population in this part of Canada is unaware of the risk – indeed, the take-up rate of associated and readily available insurance covers is quite low at 3.4% of homeowners versus 65% in the cities of Vancouver and Victoria in the most populous Western province, British Columbia.
How significant could the losses be?
A Swiss Re in-house catastrophe modelling tool estimates that a magnitude 7.3 earthquake near Quebec City could result in total losses to residential property alone of CAD 10.6 billion. As noted above, insurance penetration is remarkably low. Only CAD 0.48 billion of those losses would be covered by insurance, which means 95% of the losses would need to be mostly funded by households themselves. This could be financially devastating for those affected by an earthquake event.
Mitigating the risk
To ensure that household losses derived from earthquakes are as manageable as possible, governments and insurers should work together. Insurers and the government need to build public awareness in eastern Canada of the risk that earthquakes pose, while demonstrating the benefits of insurance as a risk mitigation tool. People often assume that state emergency funds will be forthcoming in the event of an earthquake, but this may not always be the case. Earthquake insurance products can ease the financial and economic loss burden resulting from a seismic event and hence also offer households security of knowledge that support would forthcoming. As experience from other seismically active regions in the world shows, these products can spread the risk, making it easier to manage. The industry has all the tools required to innovate, via design and distribution, which would make earthquake cover more affordable and attractive.