New Madrid Bicentennial a Reminder Earthquakes Can Occur Anywhere, Any Time

New York Press Office: (212) 346-5500; media@iii.org

 

NEW YORK, December 16, 2011 — California and the Pacific Northwest are parts of the U.S. most associated with earthquakes, but 200 years ago today marks the first in a sequence of three earthquakes that shook the New Madrid area and were the most powerful recorded earthquakes to hit the central United States. While the insured losses were minimal because the area was sparsely populated at the time, if the same magnitude earthquakes were to hit the area today, the claims payouts could be in the billions of dollars, according to the Insurance Information Institute (I.I.I.).

 

“Everyone, no matter where they live, should contact their insurance agent or company representative to make sure that they have the right type and amount of insurance for their specific situation,” said Jeanne M. Salvatore, senior vice president of Public Affairs and consumer spokesperson for the I.I.I. “All Americans also need to have an up-to-date home inventory of their personal possessions and an evacuation plan, as well as taking reasonable steps to protect their homes and businesses from any disasters that pose a risk to their personal safety and property.”

 

The potential cost of earthquakes in the U.S. has been growing because of increased urban development in seismically active areas and the vulnerability of older structures, which in some cities may not have been built or upgraded to current building codes. Unlike other natural disasters such as hurricanes, there are no specific seasons for earthquakes

 

Since 1900, earthquakes have occurred in 39 states and caused damage in all 50. This year, for example, a series of minor quakes struck Arkansas, including a 4.7 magnitude temblor—the most severe in that state in 35 years—on February 27. And, on August 23, an 5.8-maginitude earthquake in Mineral, Virginia, was felt along the East Coast and caused damage to the Washington Monument and National Cathedral in Washington, D.C; it was the largest quake to have occurred in the eastern U.S. since 1897.

 

According to a report by Risk Management Solutions (RMS), there is a 28 to 46 percent likelihood of a 6.0 magnitude earthquake or greater hitting the New Madrid area within the next 50 years. St. Louis, Missouri and Memphis, Tennessee are the most-populous cities closest to the NMSZ. The analysis also suggests that insured losses could be between $5 billion and $50 billion, if even a moderate series of earthquakes was to occur adjacent to major urban areas in the New Madrid Region.

 

The 1994 6.7 magnitude Northridge, California, earthquake and the 1989 6.9 magnitude Loma Prieta quake, which struck northern California, were the two most costly earthquakes in U.S. history as defined by insured losses. Northridge caused $15.3 billion in insured losses when it occurred 17 years ago, a sum equal to $22.5 billion in 2010 dollars, according to the I.I.I.’s calculations. Loma Prieta caused $960 million in insured losses in 1989, a figure equal to about $1.7 billion in today’s dollars.

 

While there has not been a truly significant quake on the U.S. mainland since Northridge in 1994, it is only a matter of time. 

EARTHQUAKES AND INSURANCE

Standard homeowners, renters and business insurance policies do not cover damage from earthquakes. Coverage is available either in the form of an endorsement or as a separate policy. Earthquake insurance provides protection from the shaking and cracking that can destroy buildings and personal possessions. Coverage for other kinds of damage that may result from earthquakes, such as fire and water damage due to burst gas and water pipes, is generally provided by standard home and renters insurance policies.

 

Earthquake coverage is available from private insurance companies. In California, homeowners can also get coverage from the California Earthquake Authority (CEA), a privately funded, publicly managed organization. Only about 12 percent of California residents currently have earthquake coverage, down from about 30 percent in 1996, two years after the Northridge, California, earthquake. Nationwide 86 percent to 90 percent of U.S. homeowners lack earthquake coverage, according to A.M. Best.

 

Earthquake insurance policies often carry a deductible, generally in the form of a percentage rather than a dollar amount. Deductibles can range anywhere from 2 percent to 20 percent of the replacement value of the insured structure. This means that if it costs $100,000 to rebuild a home and the policy had a 2 percent deductible, the policyholder would be responsible for paying the first $2,000.

 

Earthquake insurance premium rates are determined differently by each insurance company and can vary widely depending on several factors, such as the location of the building and the construction materials used.

 

Cars and other vehicles are covered for earthquake damage under the optional comprehensive portion of an auto insurance policy.

 

For more information, the I.I.I. has a special New Madrid resource page, which includes: