Earthquakes in Eastern Canada – Really?

(Dr. Balz Grollimund, Head Treaty Underwriting, Swiss Reinsurance Company)

Let's face it, the past few years of earthquake activity haven't been flattering for earthquake specialists around the world. The three biggest earthquake-related insurance losses ever all occurred in areas we did not expect them. In Japan, experts were expecting the next "big one" on a large fault off the Honshu coastline to the west of Tokyo. Yet, the big 2011 earthquake, which also caused the devastating Tsunami, occurred to the northeast of Tokyo on a fault which was not expected to create any earthquakes close to the size that was seen in 2011. In New Zealand, all eyes have been on Wellington, the city everybody agreed was at highest risk for an earthquake. Yet, the devastating 2010/2011 earthquake sequence hit somewhere else, on previously unknown faults near Christchurch. Going back further, even the 1994 Northridge earthquake in California occurred on a previously unknown fault.

Being an earthquake specialist myself, this makes me pause and think about how we can improve going forward. Clearly, we should continue efforts to improve understanding of earthquake risk around the world, and to put special focus on cities thought to be in high earthquake risk areas. But we also have to recognize that there is much we don't yet understand about when and where earthquakes will happen going forward. The next "big one" just might again hit cities which currently don't get much attention.

But what does all of this have to do with Canada? Well, similar to Japan and New Zealand prior to the recent events, Canada has a clear focus on earthquake hazard in British Columbia, especially the cities of Victoria and the larger Vancouver area. Having visited the area a few months ago, I was amazed at the level of earthquake awareness: authorities are working on emergency management plans, key infrastructure is being evaluated for earthquake safety and measures are underway to retrofit or replace inadequate structures. And about half of all homeowners purchase earthquake insurance, which will help to pay for reconstruction following an event. Eastern Canada on the other hand is not typically associated with earthquake risk. As a result, the region is less prepared. Building codes for new construction are less stringent than in western Canada, historic masonry buildings – known to be very damage-prone during earthquakes – are prevalent, and only a small fraction of homeowners purchase earthquake insurance.  This would leave individuals and local and federal government on the hook for repairs.

And earthquakes in eastern Canada are not something we can afford to ignore. Most prominently, the Charlevoix region in northeastern Quebec has had several damaging earthquakes of sizeable magnitude. The most recent sizeable event occurred in 1925, with a magnitude of 6.2 in the area of Charlevoix-Kamouraska along the Saint Lawrence River roughly 100km northeast of Quebec City. The event caused extensive damage in the towns of the epicentral area and some damage was also observed in Quebec City. A much larger event of estimated magnitude 7 or larger struck the same area in 1663. According to an AIR study commissioned by the Insurance Bureau of Canada, the total loss for an event similar to the 1663 earthquake would cause a total property loss of CAD 47.3bn of which only 26%, or CAD 12.23bn would be insured. For residential properties, only CAD 0.6bn or 2.8% of the total damage of CAD 19.6bn would be picked up by insurance. Therefore, residential property owners would have to come up with a staggering sum of CAD 19bn to pay for reconstruction or hope for the government to help out. 

From other regions around the world, we've seen that the resilience of communities to natural catastrophes is strongly driven by the financial ability of property owners to rebuild. In Italy for instance, where equally few residential property owners purchase earthquake insurance, cities and towns affected by earthquakes in the past remain to be fully rebuilt. After an earthquake hit southern Italy near Naples in 1980, some survivors had to wait for more than 20 years before their damaged properties were restored by the government. The downtown area of L'Aquila, which was hit by an earthquake in 2009, largely remains to be rebuilt seven years on. Contrast that with Christchurch New Zealand: Even though the people of Christchurch went through hard times in the aftermath of the series of earthquakes affecting their city in 2010/2011, they didn't have to worry about the financial burden. Insurance companies are paying for USD 22.2bn out of the total event damage of USD 26.6bn, so reconstruction can start as soon as building permits are available.

Taking all this together, there is a clear case to take steps to ensure that more property owners protect themselves against earthquakes, not just in British Columbia but also in other parts of Canada and especially in Quebec. As with many things, a first step towards action is awareness. We have to ask ourselves, what can we do to raise the awareness of the Canadian population to the potential hazard of earthquakes and the impact they can have? Only if we can find answers to this question will it be possible to lead Canadian communities toward improved earthquake resilience. Encouragingly, examples from around the world, including British Columbia, show that it can be done.

We'd love to hear your thoughts on ways we can all take steps to better prepare ourselves against this unpredictable peril.

This blog post has been written by Dr. Balz Grollimund, Head Treaty Underwriting at Swiss Reinsurance Company

Dr. Balz Grollimund is a panelist at CatIQ’s Canadian Catastrophe Conference (C4 2017) on the Geomagnetic Storms - The Next Black Swan session during the conference.