After the summer of flooding, it can be expected that insurers are focused on water coverage. But recent studies have shown there is another, potential $75 billion threat facing one of Canada’s largest cities.
“Insurers, governments and all Canadians have a responsibility to prepare,” said Don Forgeron, president and CEO of the Insurance Bureau of Canada. “If a mega-earthquake should strike in a densely populated area, insurance alone will not pay for all the damage. Governments and consumers have a role to play.”
According to the Geological Survey of Canada and Natural Resources Canada, southwestern British Columbia, including the provincial capital, Victoria, and the Vancouver metropolitan area, falls in a high-risk area for earthquake – and the scenarios predict losses in the billions of dollars.
“The risk of a major earthquake affects us all, not just those living in high-risk areas,” says Forgeron. “Events of this magnitude have a domino effect on the Canadian economy triggered by property damage, supply chain interruption, loss of services, infrastructure failure and business interruption.”
There is at least a 30 per cent chance that an earthquake strong enough to cause significant damage will strike this area in the next 50 years. Anticipated total direct and indirect losses have been forecast at $74.7 billion.
The study – conducted by AIR Worldwide and released by the IBO today in Ottawa – is the first scientific evaluation in two decades on earthquake threat. (continued.)
The earthquake model used by AIR Worldwide shows the damage that would be caused by a seismic event of 9.0 occurring in the Cascadia subduction zone at a depth of 11 kilometres, in the Pacific Ocean approximately 75 kilometres of the west coast of Vancouver Island, and 300 kilometres from downtown Vancouver.
Identified as the Western Cascadia Subduction Scenario in the study, an earthquake of this magnitude is expected to “generate a modest tsunami,” with the lower two thirds of Vancouver Island experiencing “the strongest ground motion.”
The good news for insurers is that the area around the capital of Victoria has comparatively little insured property and “low levels of insurance losses are anticipated.”
The city of Vancouver should expect large damage to buildings eight stories and higher, along with substantial damage to roads and other infrastructure.
In the east, the region from the St. Lawrence River Valley to the Ottawa Valley—an area including Québec City, Montreal, and Ottawa—is another high-risk area in which there is at least a 5-15 per cent chance that a strong earthquake will strike in the next 50 years. The damage from a quake using a similar scenario model there of a 7.1 seismic event is estimated to be $61 billion.
The IBC is looking to partner with government, the financial services industry and non-government organizations to help mitigate the overall economic losses. (continued.)
About 4,000 earthquakes are recorded in Canada each year – and most of those go unnoticed. In the past three hundred years there have been only 24 significant earthquakes that were widely felt in the country.
These significant events are mainly concentrated in two regions, one off the west coast of British Columbia and the other in southeastern Canada, mainly in southern Québec and southeastern Ontario. Although these two seismic source zones cover only a small fraction of Canada by area, they impact about 40 per cent of the national population.
“We believe this will be part of a thoughtful and integrated approach that ensures the best outcomes for Canadians,” says Forgeron. “Preparing for a major earthquake must be guided by sound research. The AIR study provides just that.”