Earthquake Resilience & The Big One

Most people aren’t prepared for the big one.

If there was one common theme at a three-day earthquake conference in downtown Long Beach, Calif., that was it.

The National Earthquake Conference that took place in early May is a quadrennial event bringing together academia, building professionals, FEMA directorates, first responders, geologists, emergency managers, insurance professionals, state and local governments, the private sector and others to discuss best practices for outreach, code advancement and policy initiatives.

The conference was sponsored by the California Earthquake Authority, and had speakers including Lucy Jones, with the United States Geological Survey and Caltech, and several high ranking members of departments of insurance from several states.

“We know that a minority of homes in earthquake countries, here in California and elsewhere, have financial protection,” said CEA CEO Glenn Pomeroy.

Pomeroy moderated a panel titled “Reducing Risk – The Role Insurance Plays in Building Resilient Communities.”

Panelists were Maiclaire Bolton, senior product manager of global earthquake products at CoreLogic Inc., Laurie Johnson, principal of Johnson Consulting, and Buddy Combs, director of public policy and assistant general counsel with the Oklahoma Insurance Department.

Bolton talked about earthquake science and categorized seismic events into high-frequency, mid-frequency and low-frequency categories.

She noted that the 1994 magnitude 6.7 Northridge Earthquake would be categorized as a mid-frequency event.

“That’s pretty scary to think of that as a mid-frequency event,” Bolton said.

Johnson like Bolton talked about the impact of disaster from a numbers point of view, using as baseline comparisons disasters like Hurricane Katrina and Superstorm Sandy.

Katrina caused $44 billion in damage from flooding and storm surge in the five affected states, and to help recovery efforts the federal government stepped in with $13 billion in Community Development Block Grant-Disaster Recovery assistance funds for Louisiana alone, while the government forked over more than $16 billion in CDBG-DR assistance to help Sandy recovery efforts.

“When a disaster hits there’s a simultaneous depletion of capital,” Johnson said.

Until recently there would be little reason for a representative from Oklahoma to speak at an earthquake conference.

Combs said that when he began with the Oklahoma Insurance Department more than five years ago he thought he’d be dealing exclusively with perils that are typically associated with that region like tornadoes and flooding.

“When I started with the insurance department I never expected to be talking to a group of people about earthquakes,” he said.

He said the insurance department has shifted a some of its efforts to educating the residents of the state about earthquakes and the need for earthquake insurance.

“What we found out really quickly is that there are a lot of people who don’t understand how earthquake insurance works,” he said.

In 2013 there were 209 M3.0 and above earthquakes recorded in Oklahoma, followed by 567 quakes in 2014, according to area seismologists.

In 2015 there were 907 quakes at M3.0 and above recorded, Combs said.

The shaking has gotten people’s attention, he added.

“We’ve seen a large take up in earthquake insurance,” he said.

He attributed many of the quakes to increased fracking operations in the state, saying “induced seismicity has become a big deal in Oklahoma.”

Some policies do not cover man-made earthquakes, but there are many policies that do cover for earthquakes from fracking, he said.

To deal with this the insurance department began requiring carriers to tell customers about earthquake insurance and whether their policies cover quakes thought to be due to fracking.

Combs said of the 156 carriers who sell earthquake insurance in Oklahoma, 109 have policies that do protect people whose homes were damaged due to earthquakes believed to be generated by fracking activities.

However, the increased seismic activity has led to increased rates for earthquake insurance and fewer carriers interested in selling policies, he said.

“We’re starting to see some constriction in Oklahoma,” he said.

Oklahoma Insurance Commissioner John D. Doak in April ordered a public hearing to investigate rising rates over concerns about a competitiveness in the state’s earthquake insurance market. The May 24 hearing will include data gathered by the insurance department as well as comments from insurers and citizens.

Pomeroy emphasized the need to get the message out that earthquake insurance is not included in the standard homeowners policy, and he talked about new offerings from CEA designed to get more California homeowners to purchase the coverage.

Those include a premium calculator, more deductible options, a rate reduction and a television advertising blitz.

The efforts seem to be working, he said.

“We now have about 880,000 policyholders that we protect,” Pomeroy said.