2010-the year of devastating earthquakes The years biggest earthquakes Earthquakes caused 76% of all na Some of the most devastating earthquakes in history occurred in 2010. In fact, nearly catastrophe-related fatalities in 20 76% of the approximately lo fatalities caused by natural disasters in 2010 were at- tributed to earthquakes. The most notable of these events in terms of their impact on so- land(Mw 7.0) and Haiti(Mw 7.0). The Haiti earthquake, which struck in January 2010 a ciety were in Chile(Mw8.8), Indonesia(Mw 7.8 and Mw 7.0). Mexico(Mw 7.2). New Ze vas by far the most deadly, claiming more than 220000 lives-more than 2% of the car ibbean nation s population. In contrast, the five other earthquakes combined claimed ap- proximately 1100 victims. The Chile earthquake was much more From a seismological point of view, the Haiti and New Zealand events were similar. severe from a seismological point of view Both had a moment magnitude(Mw)of 7.0. and each produced a similar amount than the Haiti and New Zealand earth- f seismic energy, thought to be the equivalent of 475 kilotonnes of explosives Both events also exposed roughly 1 000 km2 of land to severe shaking for roughly 1 minute. By comparison, the Chile event released roughly 500 times the energy of the haiti event. It was also 500 times more powerful than the New Zealand event. subjecting an area of roughly 100000 km2 to severe shaking for up to 3 minutes Chile s earthquake resulted in economic In terms of economic losses, the six aforementioned earthquakes generated damages losses of approximately USD 30bn of more than USD 46bn. The Chile event resulted in the largest economic loss-USD 30bn -which is 15% of the nations gDP ng-term trends in earthquake activity Since 1970, the 2010 earthquake in Haiti A review of historical earthquake data dating back to 1970 reveals that the number of the 2004 earthquake in Indonesia and fatalities was highest in 1976. 2004 and 2010 (see Figure 4). In December 2004. a the 1976 earthquake in China have been massive earthquake struck Indonesia and triggered the deadly tsunami that claimed 220000 lives, an event that was nearly as deadly as the January 2010 earthquake in Haiti (estimated 220 570 lives lost). Only one other earthquake the 1976 Tangshan earthquake in China-was as deadly. since 1970, claiming 255 000 lives 300000 Annual earthquake fatalities arison of annual fatalities due o earthquakes since 1970 250000 200000 150000 100000 50000 0 Source: Swiss Re Economic Research& Consulting Two of the three costliest earthquakes In terms of insured losses, 2 of the 3 costliest earthquakes since 1970 occurred in since 1970-in terms of insured losses 2010. The Chile event cost insurers approximately USD 8bn. while the New Zealand occurred in 2010 event led to insured losses estimated at more than USD 4.4bn. Only one event since 1970 has resulted in higher insured losses -the 1994 Northridge earthquake in California - which, at prices of 2010. cost insurers USD 21bn Swiss Re, sigma No 1/2011
Swiss Re, sigma No 1/2011 9 2010 – the year of devastating earthquakes The year’s biggest earthquakes Some of the most devastating earthquakes in history occurred in 2010. In fact, nearly 76% of the approximately 297 000 fatalities caused by natural disasters in 2010 were attributed to earthquakes. The most notable of these events in terms of their impact on society were in Chile (MW 8.8), Indonesia(MW 7.8 and MW 7.0), Mexico (MW 7.2), New Zealand (MW 7.0), and Haiti (MW 7.0). The Haiti earthquake, which struck in January 2010, was by far the most deadly, claiming more than 220 000 lives – more than 2% of the Caribbean nation’s population. In contrast, the five other earthquakes combined claimed approximately 1100 victims. From a seismological point of view, the Haiti and New Zealand events were similar. Both had a moment magnitude (MW) of 7.0, and each produced a similar amount of seismic energy, thought to be the equivalent of 475 kilotonnes of explosives. Both events also exposed roughly 1 000 km2 of land to severe shaking for roughly 1 minute. By comparison, the Chile event released roughly 500 times the energy of the Haiti event. It was also 500 times more powerful than the New Zealand event, subjecting an area of roughly 100 000 km2 to severe shaking for up to 3 minutes. In terms of economic losses, the six aforementioned earthquakes generated damages of more than USD 46bn. The Chile event resulted in the largest economic loss – USD 30bn – which is 15% of the nation’s GDP. Long-term trends in earthquake activity A review of historical earthquake data dating back to 1970 reveals that the number of fatalities was highest in 1976, 2004 and 2010 (see Figure 4). In December 2004, a massive earthquake struck Indonesia and triggered the deadly tsunami that claimed 220 000 lives, an event that was nearly as deadly as the January 2010 earthquake in Haiti (estimated 220 570 lives lost). Only one other earthquake – the 1976 Tangshan earthquake in China – was as deadly, since 1970, claiming 255 000 lives. 0 50000 100000 150000 200000 250000 300000 2010 2005 2000 1995 1990 1985 1980 1975 1970 Annual earthquake fatalities Source: Swiss Re Economic Research & Consulting In terms of insured losses, 2 of the 3 costliest earthquakes since 1970 occurred in 2010. The Chile event cost insurers approximately USD 8bn, while the New Zealand event led to insured losses estimated at more than USD 4.4bn. Only one event since 1970 has resulted in higher insured losses – the 1994 Northridge earthquake in California – which, at prices of 2010, cost insurers USD 21bn. Earthquakes caused 76% of all natural catastrophe-related fatalities in 2010. The Chile earthquake was much more severe from a seismological point of view than the Haiti and New Zealand earthquakes. Chile’s earthquake resulted in economic losses of approximately USD 30bn. Since 1970, the 2010 earthquake in Haiti, the 2004 earthquake in Indonesia and the 1976 earthquake in China have been the deadliest. Figure 4 Comparison of annual fatalities due to earthquakes since 1970 Two of the three costliest earthquakes since 1970 – in terms of insured losses – occurred in 2010
2010-the year of devastating earthquakes 2010 was not an unusually active year Do the large earthquake losses in 2010 signal a long-term increase in earthquake for earthquakes with a magnitude activity? Since 1900, events with a similar moment magnitude of 7 to 7.9 have oc- of 7 to 7.9 curred about 15 times per year on average(see Figure 5). Most of these events occur in remote regions and do not attract much attention. The number of these types of events can vary significantly from year to year. For instance, 1989 was an extremely calm year with only 5 earthquakes of this magnitude, while 31 such earthquakes oc- urred in 1943. Any year in which the number of earthquakes of this magnitude falls between 11 and 20 can be considered " normal" from a seismological point of view. In 2010. 21 such events occurred, which is slightly above the"normal" long term range However, similar levels have occurred repeatedly in the past(eg 25 in 1968. 22 in 1957. 26in1950) Number of events per year Average number of earthquakes per year of magnitude 7 to 7. 9 and 8 to 8.9, 2 NWWLWIA 10 EMAAAA A Moto 7.9 8to99 7to79 Average 7 to 7.9+ Average 8 to 9.9 Average 7 to 7.9 Auerege umber of earthquakes peryear 35 Number of ent per year. 30 1970-2010 M7to 7.9 M8 to 9.9 Average 7 to 7.9 Average 8 to 9.9+ verage 7 to 7.9+ The dashed lines indicate the expected variation according to one standard deviation. Source: Swiss Re, based on the Centennial and PDE earthquake catalogues provided by the Us Geological Survey. Swiss Re, sigma No 1/2011
10 Swiss Re, sigma No 1/2011 2010 – the year of devastating earthquakes Do the large earthquake losses in 2010 signal a long-term increase in earthquake activity? Since 1900, events with a similar moment magnitude of 7 to 7.9 have occurred about 15 times per year on average (see Figure 5). Most of these events occur in remote regions and do not attract much attention. The number of these types of events can vary significantly from year to year. For instance, 1989 was an extremely calm year with only 5 earthquakes of this magnitude, while 31 such earthquakes occurred in 1943. Any year in which the number of earthquakes of this magnitude falls between 11 and 20 can be considered “normal” from a seismological point of view. In 2010, 21 such events occurred, which is slightly above the “normal” long term range. However, similar levels have occurred repeatedly in the past (eg 25 in 1968, 22 in 1957, 26 in 1950). Number of events per year 0 5 10 15 20 25 30 35 M 7 to 7.9 M 8 to 9.9 2000 1975 1950 1925 1900 Average 7 to 7.9 – Average 7 to 7.9 + Average 7 to 7.9 Average 8 to 9.9 + Average 8 to 9.9 Number of events per year 0 5 10 15 20 25 30 35 M 7 to 7.9 M 8 to 9.9 2010 2005 2000 1995 1990 1985 1980 1975 1970 Average 7 to 7.9 – Average 7 to 7.9 + Average 7 to 7.9 Average 8 to 9.9 + Average 8 to 9.9 The dashed lines indicate the expected variation according to one standard deviation. Source: Swiss Re, based on the Centennial and PDE earthquake catalogues provided by the US Geological Survey. 2010 was not an unusually active year for earthquakes with a magnitude of 7 to 7.9. Figure 5 Average number of earthquakes per year of magnitude 7 to 7.9 and 8 to 8.9, 1900–2010 Figure 6 Average number of earthquakes per year of magnitude 7 to 7.9 and 8 to 8.9, 1970–2010
2010 was also not an extraordinary year For larger earthquakes -ie those with a moment magnitude of 8 or higher- 2010 for earthquakes with a magnitude was not an extraordinary year. Since 1900. 82 such events have occurred worldwide. of 8 or high which corresponds to slightly less than 1 event per year. The Chile earthquake was the only event in 2010 with a moment magnitude higher than 8 Figure Historical epicentres with a moment Insurance Penetration L No da 0-25% 25-5% ke Epicentres 1970-2009 5-75% ●8.0-90 Magnitude 75-10% 7.0-7.9 Magnitude 6.0-6.9 Magnitude Source: Swiss Re CatNet http:/www.nxtbookfr/webapp/nxy/catnet-guide/geoportayindex.php#/o No long-term trend of increasing earth Based on these observations the number of earthquakes in 2010 fell within the quake activity has emerged xpected ranges. In contrast to weather-related natural perils, no long-term trend in global earthquake activity has emerged . however, earthquake activity does However, as the 2004 Indonesia earthquake with a moment magnitude of 9.0 has appear to increase in the surrounding shown, mega earthquakes often result in increased earthquake activity in the surround ing region. In Chile, especially in the areas near the fault rupture of the February 27 2010 event, the probability of further earthquake activity will remain high for some time. This was seen in the January 2, 2011 earthquake which had a moment magni- le 7.1 in Araucana, Chile- south of Concepcion where the 2010 event occurred Iso, the devastating February 22, 2011 earthquake in Christchurch occurred on the fringes of the September 4. 2010 earthquake ( Re)insurers are likely to take this effect into account when calculating risk-adequate earthquake premiums While global seismic activity was not markedly above average in 2010, the number of are rising because of higher population fatalities and the size of insured losses have soared. A significant trend has been noted densities and because populations on the exposure side: population growth and higher population density. especially in ur are growing in seismically active areas. ban areas, exposes more people to a single damaging earthquake. Moreover, many of he rapidly growing urban areas with high population densities are located in seismical ly active areas(eg Istanbul, Mexico City, Jakarta, Manila, Tokyo). As a result, the proba- lity of earthquakes with a high death toll continuously increases, although the seismic threat itself remains unchanged Swiss Re, sigma No 1/2011
Swiss Re, sigma No 1/2011 11 For larger earthquakes – ie those with a moment magnitude of 8 or higher – 2010 was not an extraordinary year. Since 1900, 82 such events have occurred worldwide, which corresponds to slightly less than 1 event per year. The Chile earthquake was the only event in 2010 with a moment magnitude higher than 8. No data 0–2.5% 2.5–5% 5–7.5% 7.5–10% >10% Insurance Penetration Earthquake Epicentres 1970–2009 8.0–9.0 Magnitude 7.0–7.9 Magnitude 6.0–6.9 Magnitude Source: Swiss Re CatNet http://www.nxtbook.fr/webapp/nxt/CatNet-Guide/Geoportal/index.php#/0 Based on these observations, the number of earthquakes in 2010 fell within the expected ranges. In contrast to weather-related natural perils, no long-term trend in global earthquake activity has emerged. However, as the 2004 Indonesia earthquake with a moment magnitude of 9.0 has shown, mega earthquakes often result in increased earthquake activity in the surrounding region. In Chile, especially in the areas near the fault rupture of the February 27, 2010 event, the probability of further earthquake activity will remain high for some time. This was seen in the January 2, 2011 earthquake which had a moment magnitude 7.1 in Araucana, Chile – south of Concépcion where the 2010 event occurred. Also, the devastating February 22, 2011 earthquake in Christchurch occurred on the fringes of the September 4, 2010 earthquake. (Re)insurers are likely to take this effect into account when calculating risk-adequate earthquake premiums. While global seismic activity was not markedly above average in 2010, the number of fatalities and the size of insured losses have soared. A significant trend has been noted on the exposure side: population growth and higher population density, especially in urban areas, exposes more people to a single damaging earthquake. Moreover, many of the rapidly growing urban areas with high population densities are located in seismically active areas (eg Istanbul, Mexico City, Jakarta, Manila, Tokyo). As a result, the probability of earthquakes with a high death toll continuously increases, although the seismic threat itself remains unchanged. 2010 was also not an extraordinary year for earthquakes with a magnitude of 8 or higher. Figure 7 Historical epicentres with a moment magnitude of 6 or higher No long-term trend of increasing earthquake activity has emerged... ...however, earthquake activity does appear to increase in the surrounding region once a major earthquake occurs. Earthquake fatalities and insured losses are rising because of higher population densities and because populations are growing in seismically active areas
2010-the year of devastating earthquakes The deadliest earthquakes tend to occur While the deadliest earthquakes typically occur in emerging market countries, the cost- liest earthquakes in terms of insured losses occur much more often in industrialised re- the costliest earthquakes tend to occur gions. The costliest earthquakes for insurers over the past 20 years were in Northridge California(1994). Concepcion, Chile(2010). Darfield, New Zealand(2010)and Kobe. lapan (1995). A few factors contributed to the large insurance and overall economic losses -eg property exposure and values are increasing around urban areas, leading to an increased potential for large financial losses from a single earthquake. Also, in many markets such as Chile, earthquake insurance penetration is increasing. Therefore, the insurance industry carries an increasing portion of the financial burden to the overall economy. And finally, the increasing technological complexity of industrial processes makes damages to industrial facilities more difficult and costly to fix. Improved building standards that are Fortunately the death toll in industrialised countries has not risen along with insured strictly enforced, solid infrastructur arthquake losses Continuously improved building standards that are strictly enforced. and disaster relief efforts help along with good infrastructure and efficient disaster relief efforts have helped mitigate the negative consequences of disasters in these countries. The relatively low number of deaths from the earthquakes in Chile and New Zealand in 2010 is certainly testimony Lessons learned The earthquakes in Chile and New Zealand As with any large catastrophic event, the earthquakes in 2010 provided a unique learn- underscored the importance of stringent ing experience and offered invaluable insights. For example, effective loss prevention building codes that are strictly enforced measures, such as earthquake-resistant building designs, are one of the key reasons why the Chile earthquake(562 deaths)did not result in more fatalities. This is striking given that the event, which had a moment magnitude of 8.8. was the second largest earthquake-in terms of seismic energy released -since 1970 and the sixth largest ever recorded worldwide. The existence of stringent building codes and their rigorous appli- cation in New Zealand proved very effective in saving lives in the September 4, 2010 earthquake. It is too early to determine to what degree this is also applicable to the Feb- ruary 22, 2011 earthquake in Christchurch. Insurance has become a key pillar for post- The insurance industry has become a key enabler of post-disaster financing in industrial- ised countries. Insurers are paying more than one quarter of the total economic cost of he Chile event, and the proportion is even higher in New Zealand. The bulk of the insur ance loss in Chile was carried by international (re)insurance companies. The correspond- ing inflow of capital serves to stimulate the Chilean economy via the reconstruction ef Proper prevention-and post-disaster manage- Meanwhile, the devastating event in Haiti reveals that proper prevention- and disa ment remains a challenge in the emerging management remains a challenge in emerging market countries. Given that these coun- market countries tries have virtually no earthquake insurance market. what can be done to reduce the im- pact of a future earthquake on the population? More comprehensive and stringent building standards should be implemented during reconstruction, especially in hgh risk areas. Swiss Re developed an earthquake hazard map for Haiti immediately following the event that has served as the basis for such decisions(see Box Swiss Re, sigma No 1/2011
12 Swiss Re, sigma No 1/2011 While the deadliest earthquakes typically occur in emerging market countries, the costliest earthquakes in terms of insured losses occur much more often in industrialised regions. The costliest earthquakes for insurers over the past 20 years were in Northridge, California (1994), Concépcion, Chile (2010), Darfield, New Zealand (2010) and Kobe, Japan (1995). A few factors contributed to the large insurance and overall economic losses – eg property exposure and values are increasing around urban areas, leading to an increased potential for large financial losses from a single earthquake. Also, in many markets such as Chile, earthquake insurance penetration is increasing. Therefore, the insurance industry carries an increasing portion of the financial burden to the overall economy. And finally, the increasing technological com plexity of industrial processes makes damages to industrial facilities more difficult and costly to fix. Fortunately, the death toll in industrialised countries has not risen along with insured earthquake losses. Continuously improved building standards that are strictly enforced, along with good infrastructure and efficient disaster relief efforts have helped mitigate the negative consequences of disasters in these countries. The relatively low number of deaths from the earthquakes in Chile and New Zealand in 2010 is certainly testimony to this. Lessons learned As with any large catastrophic event, the earthquakes in 2010 provided a unique learning experience and offered invaluable insights. For example, effective loss prevention measures, such as earthquake-resistant building designs, are one of the key reasons why the Chile earthquake (562 deaths) did not result in more fatalities. This is striking given that the event, which had a moment magnitude of 8.8, was the second largest earthquake - in terms of seismic energy released - since 1970 and the sixth largest ever recorded worldwide. The existence of stringent building codes and their rigorous application in New Zealand proved very effective in saving lives in the September 4, 2010 earthquake. It is too early to determine to what degree this is also applicable to the February 22, 2011 earthquake in Christchurch. The insurance industry has become a key enabler of post-disaster financing in industrialised countries. Insurers are paying more than one quarter of the total economic cost of the Chile event, and the proportion is even higher in New Zealand. The bulk of the insurance loss in Chile was carried by international (re)insurance companies. The corresponding inflow of capital serves to stimulate the Chilean economy via the reconstruction efforts without putting a large burden on the local insurance industry. Meanwhile, the devastating event in Haiti reveals that proper prevention- and disaster management remains a challenge in emerging market countries. Given that these countries have virtually no earthquake insurance market, what can be done to reduce the impact of a future earthquake on the population? More comprehensive and stringent building standards should be implemented during reconstruction, especially in hgh risk areas. Swiss Re developed an earthquake hazard map for Haiti immediately following the event that has served as the basis for such decisions (see Box). The deadliest earthquakes tend to occur in emerging market countries, while the costliest earthquakes tend to occur in industrialised regions. Improved building standards that are strictly enforced, solid infrastructures and disaster relief efforts help mitigate the negative effects of earthquakes. The earthquakes in Chile and New Zealand underscored the importance of stringent building codes that are strictly enforced. Insurance has become a key pillar for postdisaster financing. Proper prevention- and post- disaster management remains a challenge in the emerging market countries. 2010 – the year of devastating earthquakes