San Andreas Fault: How much would a Big One earthquake cost?

Satellite imagery shows a newly formed fault between July 4 and 6, about 15 kilometres Northeast of Ridgecrest. Fortunately, no human loss was reported.

California, a State where only 13% of property owners are covered by an earthquake insurance policy, is known for its San Andreas Fault. The 1 300-kilometer-long fault passes in particular through San Francisco and Los Angeles, two highly populated cities. The possibility of a Big One (earthquake of magnitude 8.5 or above on the Richter scale) is so feared by the Americans.

According to the seismologists, a Big One would occur around 2032. Its consequences would be devastating: it would cause the death of nearly 1800 people with more than 53 000 injuries. The material damage would be estimated at 200 billion USD

The 1906 San Francisco Earthquake: 14 insurers went bankrupt

On April 18, 1906, an earthquake struck San Francisco. The damage to the insured property reached 35 million USD, the equivalent of 6.83 billion USD in 2019. As a result of the earthquake, insurers overwhelmed by 100 000 claims ended up reimbursing 180 million USD, the equivalent of 5.24 billion USD in 2019.

The compensation of the disaster's victims led to the bankruptcy of fourteen insurers:

• 12 American insurers
• One Australian insurer
• One German insurer

This earthquake, alone, swallowed up the entire profits of insurance companies made during 47 years before the natural disaster [5].

The 1994 Northridge Earthquake (Los Angeles)

The Northridge earthquake was the result of a movement of the secondary oblique fault system to the main San Andreas Fault. The disaster claimed the lives of 72 people, injured 9000 others and caused 15 billion USD in insured damage.

Following this disasters, American insurers firmly refuse to underwrite homeowners' policies. To address this situation, the government has decided to:

• launch a limited insurance policy marketed by private insurers
• establish the California Earthquake Authority (CEA), a public agency operating as an insurance pool for the coverage of earthquake-related damage.