When are we going to get our heads buried out from the sand and face the fact that we have to start preparing for an earthquake and it will require a national effort to do so? Click here to read the full article or an excerpt below.
Potential earthquakes present a threat that could “take down” Canadian insurers, says Don Forgeron, chief executive officer of the Insurance Bureau of Canada (IBC).
A major quake on Canada’s West Coast or in Quebec could prove significantly more costly than flooding, the country’s most prevalent natural disaster, according to a new study commissioned by IBC.
The study comes at a time when the frequency and severity of natural disasters is on the rise globally. Canada is still reeling from severe flooding that hit southern Alberta and Ontario earlier this year.
Earthquakes are a “fatal risk” that could “take the industry down if we get that mega event,” Mr. Forgeron said in an interview.
“Canada faces a major risk for which we are clearly not prepared,” he added. “Inaction is not an option.”
The IBC released the study as part of an effort to lobby governments and educate Canadians, especially quake-prone areas where few residents buy earthquake insurance.
The study set out to determine whether Canada is prepared for a large earthquake, and whether the insurance industry could handle the fallout. In both scenarios, the researchers found preparations are inadequate.
Two earthquake scenarios from each of the highest-risk quake zones in Canada were presented. The first looked at a 9.0-magnitude earthquake off the west coast of Vancouver Island that would cause landslides and generate a small tsunami. The total economic loss would be about $75-billion, according to the research. Of that, only $20-billion of the losses would be insured.
The second scenario was a 7.1-magnitude earthquake that starts beneath the St. Lawrence River and would be powerful enough to be felt over much of Ontario, Quebec, New Brunswick, Nova Scotia, and parts of the United States. This disaster would result in $61-billion in total economic loss, of which $12-billion would be insured.
The report notes that such a powerful earthquake is considered a one-in-500-year event. Still, “it’s not a matter of if these scenarios will happen, but when they will happen,” said Jayanta Guin, senior vice-president of research and modelling of AIR Worldwide, which prepared the study.
“These price tags in the billions of dollars cannot be isolated from the global economy,” Mr. Forgeron noted.
Canada can look to other countries for examples of how earthquakes destroy communities and cause setbacks for entire countries. Haiti is still recovering from the 2010 earthquake that struck near Port-au-Prince, killing 220,000 people and crippling its economy. And cleanup efforts continue at Japan’s Fukushima Daiichi nuclear power plant, which was crippled in a 2011 earthquake and tsunami.
About 55 per cent of B.C. residents and 96 per cent of Quebeckers have no earthquake insurance, Mr. Forgeron noted.
But it would be difficult for insurers for quickly or dramatically increase their level of earthquake coverage because of the capital that insurers must hold to support these policies. Under new regulations, by 2022 insurers must be capitalized for a one-in-500-year quake.
Quebec City and the Greater Vancouver Area have begun to educate residents about quake dangers, and national building codes have improved in recent years. The government has talked about working toward a natural disaster mitigation plan.
The rain and flooding in Alberta cost insurers about $2-billion (U.S.) according to a recent report by reinsurance company Swiss Re. That was the largest insured loss recorded in Canada.