Earthquake Losses Skyrocketing Along with Home Values, Building Costs

A new report from the U.S. Geological Survey (USGS) indicates that the economic toll of earthquakes has?reached an estimated $14.7 billion?in total annualized building damages and associated losses. That figure is double previous estimates and accounts for higher property values, building improvements and other factors, Property Casualty 360 recently reported.

Released April 18?in conjunction with FEMA, the report uses an annualized loss estimate calculated by combining earthquake hazards, building exposure, and vulnerability; it adds up to a “sobering reminder” of the need to be prepared for such disasters, USGS director David Applegate said in a press release. While U.S. earthquakes have caused $1.5 billion to $3 billion in losses per year over the past 30 years, even one large earthquake in a populated urban area “would quickly make up the difference in losses in one fell swoop,” the agencies explained in their report.

“It is pretty eye-opening to see how much of a potential loss really is possible from earthquakes,” said Brandon Hunter, ASLI, AIS , Associate Managing Director, Underwriter, Commercial Insurance,? Burns & Wilcox , Indianapolis, Indiana. “That number was higher than anticipated, but it makes sense when you look at some of the factors like valuations increasing by quite a bit and the financial impact of those consequential losses that are included. Those things can really add up.”

Calculating the potential cost of earthquakes can help inform mitigation efforts such as retrofitting vulnerable buildings to updated codes and funding projects to improve earthquake resilience, FEMA and the USGS noted. Today, many property owners are at risk for earthquake damage and may not have coverage for these losses under their?Homeowners Insurance?or?Commercial Property Insurance.

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