Three decades after the last significant earthquake in the United States, a magnitude 7.0 quake in California was a reminder of the threat that seismic shocks can pose to businesses and people. Although the most recent quake and its aftershocks have apparently caused little damage, it’s vital that people and organizations be ready for potentially dangerous tremors in the future.
Don’t overlook quake risk
On Dec. 5, a magnitude 7.0 earthquake struck off the coast of Cape Mendocino (opens a new window) in Northern California just before 11 am PST, according to the U.S. Geological Survey (USGS), and was felt as far as San Francisco, 200 miles to the epicenter’s south. More than 10,000 customers in Humboldt County were temporarily without power, and a tsunami warning, issued for coastal counties in Northern California and Oregon, was soon lifted by authorities. In the end, the earthquake resulted in relatively little physical damage and no reported fatalities.
The Dec. 5 quake is just one of thousands that occur across the U.S. each year, hundreds of which are sizable enough to be felt by people in population centers. Earlier this year, New York City residents were surprised but ultimately unharmed by a magnitude 4.8 quake that struck nearby Tewksbury, New Jersey (opens a new window).
While the threat of a major earthquake striking New York is remote, parts of California, Oregon, Washington, and Alaska are within the “Ring of Fire,” a 25,000-mile stretch surrounding much of the Pacific Ocean, from New Zealand to Chile. More than 80% of the world’s largest earthquakes occur (opens a new window) along the Ring of Fire, according to the USGS.
Fortunately, it has been more than 30 years since an earthquake resulted in significant property damage and/or loss of life in the U.S. January 1994’s Northridge earthquake in Southern California resulted in more than 30 deaths and $15 billion in insured losses, according to insurance industry estimates.
Still, organizations should be ready for the next large earthquake.
Advance preparation
Unlike many other significant natural catastrophe risks, such as hurricanes, there is no advance warning before an earthquake strikes. That’s why it’s vital to have a plan in place before an event.
Ahead of an earthquake, organizations with properties at risk should ensure that seismic assessments and evaluations of those properties are completed by qualified and licensed structural engineering firms specializing in earthquake review and design. Organizations should seek to understand the nature of their overall risk to seismic activity: For example:
What is the severity of the earthquake hazard in regions where your properties are located?
Are those regions prone to liquefaction?
What building codes have properties been designed to meet?
Should any irregularities or deficiencies be addressed?
Organizations should take steps to secure mechanical and electrical equipment that could cause damage or disruption during a quake. This includes storage racks and shelves, cabinets, water heaters, combustible liquid tanks, batteries, vulnerable piping systems, tall and narrow objects that could overturn, and equipment on wheels and/or rooftops. It’s also important to review and update seismic protections for automatic fire sprinkler systems.
It’s important to review and update earthquake emergency response plans, and to train employees on what they need to do in the event of an earthquake. Among other steps, employees must be ready to:
Move carefully through affected properties and keep them clear until reentry is approved by authorities.
Inspect affected properties, with special attention to fire protection systems, utilities, storage, and equipment.
Notify insurers, document damage and repairs — if necessary — and keep track of any extra expenses, in preparation for a potential insurance claim submission.
Lastly, organizations should work with their insurance brokers to use earthquake modeling and other advanced analytics tools to manage and mitigate their risk. Removing as much uncertainty as possible from modeling can help organizations more accurately quantify their risk, and thus make more informed decisions about how to retain their risk or transfer it, using traditional property and business interruption insurance coverage and/or parametric insurance solutions.
For more information, contact a member of your Lockton Risk Control Services (opens a new window) team
