Insurance industry advances a national strategy on earthquake response
Ottawa, ON (Oct. 30, 2013) – A new scientific study on the impact of a major earthquake in Canada, released by Insurance Bureau of Canada, leaves no doubt that Canada is not prepared to handle a major earthquake, which could happen at any time, and that the economic impact would be significant.
IBC commissioned the study by AIR Worldwide, global experts in catastrophe modeling. The study is a peer-reviewed analysis of the impact of two major seismic events: one in British Columbia (western scenario) and the other in the Quebec City-Montreal-Ottawa corridor (eastern scenario).
“The findings will help us raise awareness of the need to plan for, and mitigate the risks of a major earthquake,” said Don Forgeron, IBC President and CEO. “The study is a valuable tool and will be shared with governments, regulators, disaster preparedness organizations, the banking community, the insurance industry, and the public.”
The study modeled two earthquake events. The western scenario shows the effect of a 9.0-magnitude earthquake off the west coast. Overall economic losses in that scenario total almost $75 billion. The eastern scenario shows the effect of a 7.1-magnitude earthquake near Quebec City. In that scenario, overall economic losses total almost $61 billion. Although these two seismic zones cover only a small fraction of Canada by area, 40% of Canadians live within them.
“The risk of a major earthquake affects us all, not just those living in high-risk areas,” said Mr. 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.”
“Insurers, governments and all Canadians have a responsibility to prepare,” said Mr. Forgeron. “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.”
“The good news is that positive action reduces the risks,” added Mr. Forgeron. “The study we released today tells us that mitigation – such as more resilient building and infrastructure – can further reduce economic losses by a third or more. That’s why we are calling for an integrated preparatory approach to the earthquake threat.”
To that end, IBC is advancing a national conversation on how to prepare for a mega-earthquake, which is a greater than 1-in-500-year event and exceeds the industry’s capacity to respond. IBC wants to work closely with governments, the financial services industry and non-government organizations to ensure that a national response framework is in place before such an earthquake hits.
“We believe this will be part of a thoughtful and integrated approach that ensures the best outcomes for Canadians,” Mr. Forgeron said. “Preparing for a major earthquake must be guided by sound research. The AIR study provides just that.”
“AIR was honoured to be selected by IBC to collaborate on this comprehensive study that will help raise awareness of earthquake risk throughout Canada,” said Dr. Jayanta Guin, Senior Vice President of Research and Modeling at AIR Worldwide. “As a direct result of this collaboration, our newly updated Canadian earthquake model provides the most complete view of seismic risk to residential, commercial and industrial properties and infrastructure.”
To read the executive summary or the full report, or for photo simulations of an earthquake in both seismic zones, visit the IBC media centre.
About Insurance Bureau of Canada
Insurance Bureau of Canada is the national industry association representing Canada’s private home, car and business insurers. Its member companies represent 90% of the property and casualty (P&C) insurance market in Canada. The P&C insurance industry employs over 115,000 Canadians, pays more than $7 billion in taxes to the federal, provincial and municipal governments, and has a total premium base of $44 billion.
To view media releases and information, visit the media section of IBC’s website at www.ibc.ca and for IBC on Twitter follow @insurancebureau.