With an average interval period of 300 years and the last major quake occurring in 1717, research suggests that an Alpine Fault Magnitude 8 (AF8) event has a 30% chance of occuring within our lifetime – and if it does, the consequences will almost certainly be severe.
The Insurance Council of New Zealand (ICNZ) and IBANZ will be hosting a presentation on the latest Alpine Fault research this month which will discuss the potential impact of an AF8 event, along with its consequences for insurers and broker clients. The event will present research on Alpine Fault rupture risk, impact scenarios, lifeline modelling and possible insurance reactions and risk pricing, with Wellington being used as an illustration.
“We will be presenting scientific information which is very new, and which updates a lot of the current modelling,” ICNZ insurance manager John Lucas told Insurance Business. “Since we may already be overdue for another event, the insurance industry needs to understand what that information means by way of risk for their customers, and what impact it may have on the infrastructure and property that is insured here in New Zealand.
“There is currently some traditional modelling that’s been done by a number of organisations over the years, and we have revised RMS modelling that was released in 2016 following the Canterbury earthquakes,” he explained. “Modelling of potential natural disasters helps insurers understand their risks, and this allows them to price that risk accurately and plan to respond to any event that may occur. It also helps them gauge how much capital or reinsurance they need to meet their obligations to policyholders.”
Lucas says that this may be modelling a worst-case scenario, but doing so is vital to New Zealand’s ability to respond to and recover from a potential event. Insurers are generally well primed to deal with large scale natural disasters, with all ICNZ members having certain procedures in place when events strike. The council expects that insurers will utilise the presented information to ensure they remain well prepared.
“The idea is for the insurance industry to be well informed, and this is particularly true for brokers who may deal with offshore insurers who are not based in New Zealand,” Lucas said. “We have had over a hundred people sign up for the event, so there has been a lot of interest from the industry so far.”