Earthquake insurance

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In the past, earthquake loss was assessed using a collection of mass inventory data and was based mostly on experts' opinions. Today it is estimated using a Damage Ratio (DR), a ratio of the earthquake damage money amount to the total value of a building.[1] Another method is the use of HAZUS, a computerized procedure for loss estimation.


In the United States, insurance companies stop selling coverage for a few weeks after a sizeable earthquake has occurred. This is because damaging aftershocks can occur after the initial quake, and rarely, it may be foreshock. Although aftershocks are smaller in magnitude, they deviate from the original epicenter. If an aftershock is significantly closer to a populated area, it can cause much more damage than the initial quake. One such example is the 2011 Christchurch earthquake in New Zealand which killed 185 people following a much larger and more distant quake with no fatalities at all.


Earthquake insurance has become a political issue in California, whose residents purchase more earthquake insurance than residents of any other state in the U.S.[citation needed] After the 1994 Northridge earthquake, nearly all insurance companies completely stopped writing homeowners' insurance policies altogether in the state, because under California law (the "mandatory offer law"), companies offering homeowners' insurance must also offer earthquake insurance. Eventually the legislature created a "mini policy" that could be sold by any insurer to comply with the mandatory offer law: only earthquake loss due to structural damage need be covered, with a 15% deductible. Claims on personal property losses and "loss of use" are limited. The legislature also created a quasi-public (privately funded, publicly managed) agency called the CEA California Earthquake Authority. Membership in the CEA by insurers is voluntary and member companies satisfy the mandatory offer law by selling the CEA mini policy. Premiums are paid to the insurer, and then pooled in the CEA to cover claims from homeowners with a CEA policy from member insurers. The state of California specifically states that it does not back up CEA earthquake insurance, in the event that claims from a major earthquake were to drain all CEA funds, nor will it cover claims from non-CEA insurers if they were to become insolvent due to earthquake losses. [1]


The government of Japan created the "Japanese Earthquake Reinsurance" scheme in 1966, and the scheme has been revised several times since.[2][3] Homeowners may buy earthquake insurance from an insurance company as an optional rider to a fire insurance policy.[4] Insurers enrolled in the JER scheme who have to pay earthquake claims to homeowners share the risk among themselves and also the government, through the JER. The government pays a much larger proportion of the claims if a single earthquake causes aggregate damage of over about 1 trillion yen (about US $8.75 billion). The maximum payout in a single year to all JER insurance claim filers is 5.5 trillion yen (about US $39.4 billion); if claims exceed this amount, then the claims are pro-rated among all claimants.[5]

New Zealand[edit]

Main article: Earthquake Commission

New Zealand's Earthquake Commission (EQC) is a Government-owned Crown entity which provides primary natural disaster insurance to the owners of residential properties in New Zealand.[6] In addition to its insurance role, EQC also undertakes research and provides training and information on disaster recovery.[7][8]



Earthquake insurance is compulsory. [9]

See also[edit]


  2. ^ 日本損害保険協会 － 地震に備えて, Retrieved on 2008-05-18.
  3. ^ Non-Life Insurance Rating Organization of Japan (April 24, 2008). Earthquake Insurance in Japan (2nd ed. ed.). Retrieved 2008-05-20. 
  4. ^ 地震保険の概要（財務省）
  5. ^ Art 4 of 地震保険に関する法律
  7. ^
  8. ^
  9. ^ "Turkish Catastrophe Insurance Pool".