California Earthquake Risk
California is home to two-thirds of the US earthquakes but on average most of them are smaller than 4.5 magnitude. There are more than 500 active faults, about 16,000 faults known faults in California, Risk of California changes constantly and there is 99% chance for one or more 6.7 magnitude or greater earthquake striking CA and most Californians live within 30 miles of an active fault. Based on the Hazus report, California earthquake annual loss is more than $3.2 billion but a severe earthquake affecting the San Francisco or Los Angeles metropolitan areas could cost hundreds of billions of dollars. Many people would be left to cope with their losses on their own after a quake, and the financial sector would also be hit by loan defaults – with both banks and investors in securities suffering losses.
In this region many counties, fewer than 10% of residential buildings are insured against earthquakes, and coverage only approaches 25% in highly exposed metropolitan areas. The percentage is higher for commercial risks, ranging between 30–40% in major cities, but it is still far from full market coverage. Over 70% of the projected loss is contributed by three MSA’s: Los Angeles-Long Beach-Santa Ana, San Francisco-Oakland-Fremont, and Riverside-San Bernardino-Ontario. Los Angeles County, with its very high economic exposure and population in addition to its proximity to many of the most seismogenic faults in the country, has an estimated Earthquake Annualized Loss (EAL) of ∼$1.14 billion, representing over 30% of the state EAL and exceeding EAL estimates for all other states in the conterminous U.S.
Why people unwilling to invest on earthquake insurance?
In California, many current residents have never experienced a major quake and thus hope that “The Big One” will either never happen or will not affect them. As a result, without earthquake insurance, citizens would have to rely solely on state aid following an event – but this type of assistance usually covers only a small portion of the losses.
California Earthquake Preparedness Alert and Its New Opportunities
Since 2020, Earling First Notice which is a cutting-edge data-driven solution for Earthquake Preparedness Alerts had brilliant success stories in detecting high-risk seismic time-window in California.
Fig 1. M6.4 earthquake hit California on 20 Dec 2022, a few days after Earling detected unusual earthquake risk for the region.
Fig 2. M6.2 earthquake hit California on 20 Dec 2021, a few days after Earling detected unusual earthquake risk for the region.
Solutions to Transfer Earthquake Risk in California
Combining Earling innovative data-driven solutions in detecting short-term high-risk time-windows with an earthquake risk transfer platform help you increase your resiliency.
Individuals and Businesses
One of the best solutions for individuals and businesses to transferring earthquake risks is JumpStart in which helping to transfer up to $10,000 risks even by $7 for individuals, and $50,000 for micro businesses. Our obligation is helping society to increase financial resilience against disasters, and Jumpstart Insurance Solutions is an available solution for it. Choose one of the insurance companies who offer earthquake insurance.
Currently, Swiss Re, Munich Re, and Zurich provided new opportunities for risk owners to transfer short-term earthquake risks in California.
Once Earling detecting a high-risk time-window, authorities need quick reaction to distribute and transfer earthquake short-term risks of the critical infrastructure or increase the current insurance coverage to increase resiliency in form of applying earthquake action plan.
As an investor or invest manager in the insurance market sector, earthquake short-term risks up to date data are very helpful for making better and fast decisions based on current geographical coverage of the insurance companies to manage financial risks before, it gets too late.
Insurance and Reinsurance Companies Risk Management
California annual earthquake loss is about $3.2 billion based on the Hazus® Estimated Annualized Earthquake Losses for the United States report, which gives an insight to how detecting short-term seismic risks can be used as a new opportunity to manage risks before other sectors react to transfer their risks to our partners in the insurance industry.
Primary insurance companies need Earling First Notice as a firsthand data that generated based on new technology in the insurance industry in which helps to manage earthquake risks through on-demand pricing and repricing. The only thing that an insurer is needed to manage risk of severe ground conditions during a high-risk time-window is making their insurance premium unattractive through pricing or other strategies with same result. Earling First Notice generate required data for financial sector including the insurance industry.
Reinsurance companies need to specify new templates and contract demanding attention and also rapid decision making based on up-to-date earthquake short-term risks. Otherwise even in the public sector, every 1000 new high-risk customers can make between $22-$100 million risk in an instant. It's a risk that can be managed easily through Earling First Notice. Earthquake risks in business and government sectors are very critical as they can create something around $50 million on each new contract during several days highr-risk time-windows. Earthquakes no longer are low-probability high-impact risks, based on the new technology earthquakes happening when new customers are transferred their risk when they are in high-probability, high-impact time-windows.