Home > Property & Casualty > SoCal earthquakes happen more frequently and overdue for a big one

SoCal earthquakes happen more frequently and overdue for a big one

Reports from researchers at Arizona State and UC Irvine who have investigated earthquakes along the San Andreas fault over the past 700 years suggest that Southern California is overdue for a major shock.

These researchers, as reported by the Insurance Journal, outlined that major quakes take place along the Carrizo Plain which stretches 100 miles northwest of Los Angeles every 45 to 144 years. But, it has been since 1857 that the last major quake ranging from 6.5 to 7.9 on the Richter scale took place at Fort Tejon. The research is contrary to previous studies that suggested the frequency of such large earthquakes to be much lower.

If these academics are correct, they are being mostly ignored by the insurance industry. Availability and cost of Earthquake Insurance continues to improve for most buyers. Capacity is up by about 25% over the last year. More standard property carriers are offering primary capacity. This is driving down pricing for most insureds. Excess Quake rates have come down 10 to 20% over the last year. The only exceptions are risks that consider high PML’s (Pre-1973 construction or not retro fitted buildings) or risks concentrated in Zone A (Downtown San Francisco) or Zone B (LA and surrounding area). These risks are considered more difficult and are subject to hard market prices. So you can see that in general, carriers are not acting like the big one is around the corner.

Even with depressed pricing, many of our clients still do not buy the earthquake coverage because their banks do not require it. Going bare is a very risky proposition. Insureds should beware. Previous large earthquakes have led to major disruptions and even bankruptcies in the marketplace. Insurance is just one financial solution. Well thought out contingency plans are a must as well. California is a risky place to do business. Be sure to plan for the next big one before it happens.

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William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

  1. September 20, 2011 at 2:56 am

    There’s a good map for tracking earthquakes in southern california and LA at http://earthquaketrack.com/v/la/recent

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