Being prepared for, and recovering quickly from, any catastrophe is one hallmark of ensuring a more safe and resilient society. But in many catastrophe-prone communities around the globe, insurance penetration rates remain stiflingly low and, as a result, building codes are either non-existent, or inconsistently enforced. In Nepal for example, almost 90 percent of the population is without insurance, and both mitigation and recovery efforts after their devastating earthquake in April 2015 are still scaling slowly.
Working with Build Change, an earthquake engineering charity and RMS philanthropic partner, and seeing their work alongside other NGOs all helping Nepal rebuild after the 2015 earthquake, is a source of inspiration for me as I continue my sabbatical in this amazing country. To read about my initial view of the progress made in Nepal, please read my earlier blog.
It has been twelve months since I first visited Nepal, spending two weeks with Build Change, an earthquake engineering charity and RMS partner, to experience first-hand the impact that they are having in the country. Back then, Nepal was only just starting to come to terms with the huge amount of reconstruction work that lay ahead after the 2015 earthquake. While there was hope that the country could “build back better” it was going to be a long, hard road ahead, as I observed in my blog in January this year.
After my first visit, I made the decision to return to this remarkable country and volunteer with Build Change for a longer period. My ambition was to become more involved in the rebuilding work, and help Build Change plan for future post-earthquake reconstruction. Since arriving I have been struck by the contradiction that although so much has progressed, a lot of the same issues are still prevalent and are holding back real change.
The devastating Nepal earthquake on April 25, 2015 is a somber reminder that other parts of this region are highly vulnerable to earthquakes.
India, in particular, stands to lose much in the event of an earthquake or other natural disaster: the economy is thriving; most of its buildings aren’t equipped to withstand an earthquake; the region is seismically active, and the continent is home to 1.2 billion people—a sizeable chunk of the world’s population.
In contrast to other seismically active countries such as the United States, Chile, Japan and Mexico, there are few (re)insurers in India using earthquake models to manage their risk, possibly due to the country’s nascent non-life insurance industry.
Let’s hope that the Nepal earthquake will prompt India’s insurance community to embrace catastrophe modeling to help understand, evaluate, and manage its own earthquake risk. Consider just a few of the following facts:
- Exposure Growth: By 2016, India is projected to be the world’s fastest growing economy. In the past decade, the country has experienced tremendous urban expansion and rapid development, particularly in mega-cities like Mumbai and Delhi.
- Buildings are at Risk: Most buildings in India are old and aren’t seismically reinforced. These buildings aren’t expected to withstand the next major earthquake. While many newer buildings have been built to higher seismic design standards they are still expected to sustain damage in a large event.
- Non-Life Insurance Penetration Is Low but Growing: India’s non-life insurance penetration is under one percent but it’s slowly increasing—making it important for (re)insurers to understand the earthquake hazard landscape.
Delhi and Mumbai – Two Vulnerable Cities
India’s two mega cities, Delhi and Mumbai, have enjoyed strong economic activity in recent years, helping to quadruple the country’s GDP between 2001 and 2013.
Both cities are located in moderate to high seismic zones, and have dense commercial centers with very high concentrations of industrial and commercial properties, including a mix of old and new buildings built to varying building standards.
According to AXCO, an insurance information services company, 95 percent of industrial and commercial property policies in India carry earthquake cover. This means that (re)insurers need to have a good understanding of the exposure vulnerability to effectively manage their earthquake portfolio aggregations and write profitable business, particularly in high hazard zones.
For (re)insurers to effectively manage the risk in their portfolio, they require an understanding of how damage can vary depending on the different type of construction. One way to do this is by using earthquake models, which take account of the different quality and types of building stock, enabling companies to understand potential uncertainty associated with varying construction types.
A Picture of India’s Earthquake Risk
India sits in a seismically active region and is prone to some of the world’s most damaging continental earthquakes.
The country is tectonically diverse and broadly characterized by two distinct seismic hazard regions: high hazard along the Himalayan belt as well as along Gujarat near the Pakistan border (inter-plate seismicity), and low-to-moderate hazard in the remaining 70 percent of India’s land area, known as the Stable Continental Region.
The M7.8 Nepal earthquake occurred on the Himalayan belt, where most of India’s earthquakes occur, including four great earthquakes (M > 8). However, since exposure concentrations and insurance penetration in these areas are low, the impact to the insurance industry has so far been negligible.
In contrast, further south on the peninsula where highly populated cities are located there have been several low magnitude earthquakes that have caused extensive damages and significant casualties, such as the Koyna (1967), Latur (1993), and Jabalpur (1997) earthquakes.
It is these types of damaging events that will be of significance to (re)insurers, particularly as insurance penetration increases. Earthquake models can help (re)insurers to quantify the impacts of potential events on their portfolios.
Using Catastrophe Models to Manage Earthquake Risk
There are many tools available to India’s insurance community to manage and mitigate earthquake risk.
Catastrophe models are one example.
Our fully probabilistic India Earthquake Model includes 14 historical events, such as the 2001 Gurajat and 2005 Kashmir earthquakes, and a stochastic event set of more than 40,000 earthquake scenarios that have the potential to impact India, providing a comprehensive view of earthquake risk India.
Since its release in 2006, (re)insurers in India and around the world have been using the RMS model output to manage their earthquake portfolio aggregations, optimizing their underwriting and capital management processes. We also help companies without the infrastructure to use fully probabilistic models to reap the benefits of the model through our consulting services.
What are some of the challenges to embracing modeling in parts of the world like India and Nepal? Feel free to ask questions or comment below.
Delhi, India also at high risk of earthquakes from the same collision zone
The earthquake in Nepal is very much a developing story. However, based on what we know, it’s shaping up to be the worst natural disaster this calendar year, particularly because Nepal is remote, economically challenged, and not resilient to an earthquake of this magnitude. The ground shaking appears to have been stronger in Kathmandu than the 1934 earthquake, possibly making it the largest we’ve seen in Nepal in almost a century.
As of April 29, Time Magazine reports that the death toll has crossed 5,000. It’s expected that casualties could surpasses 10,000, as rescue efforts continue.
While it is too early to draw substantial conclusions about the disaster—and the final casualty number—we are able to share some insight into the event and risk in the area:
Most large earthquakes in this region occur along the plate boundary collision zone:
In this region, the Indian continent dips beneath the Tibetan plateau. The Himalayan mountain chain and Everest are products of this collision zone, and the area at risk stretches from Assam and southern Bhutan to the east through Nepal to the mountains of northern Pakistan in the west. The magnitude 7.6 earthquake in Kashmir in 2005, which caused terrible damage to villages either side of the Pakistan-India border resulting in 86,000 fatalities, occurred along this plate boundary.
Nepal’s fragile economy will be affected: Nepal is one of the world’s poorest countries. The country’s main revenue sources are agriculture and tourism, including foreigners looking to scale Mount Everest. Reports indicate that the damage caused in recent days could substantially set back the economy of Nepal.
Kathmandu was hit hardest:The fault rupture of the Nepal earthquake extended eastward from its epicenter, passing underneath the city of Kathmandu.
Historic buildings throughout the city have been reduced to rubble. Darbar Square, which attracts millions of tourists annually and is vital for the Nepalese economy, has been razed. An overwhelming majority of homes in what’s known as the Gorkha district have been destroyed. Furthermore, many villages in the region needing assistance are in mountainous areas, making rescue efforts difficult.
Structures in Nepal were already at risk: The Nepalese population resides in unreinforced masonry structures that are highly vulnerable to earthquake ground shaking. Secondary hazards are of concern as well—including landslides and liquefaction.
Aid efforts are already helping to make Nepal more resilient
The widespread damage to infrastructure will be a significant setback for Nepal, which relies on agriculture and tourism. Organizations such as Build Change are already on site helping affected communities to start rebuilding their homes using disaster-resistant designs to increase the country’s resilience to future earthquakes. If you would like to support Build Change’s work, you can donate to their fund by clicking here.
Delhi, India is at high risk of earthquakes from the same collision zone
Between Gujarat and the Himalayas lies the mega-city of Delhi, which is exposed to significant earthquake risk from the surrounding plate movement.
Delhi’s seismic risk comes from both the Himalayan thrust zone, where the recent Nepal earthquake struck, and the transition zone between the stable continent and the active plate boundary—also the site of the 2001 M7.7 Gujarat earthquake, which resulted in 20,000 fatalities.
According to the Bureau of Indian Standards’ seismic zoning map, Delhi is within a “high seismic risk zone.” Combined with an older building stock made of unreinforced masonry and reinforced concrete, the city’s people, buildings, and economy are at significant risk.
Delhi is the northern industrial hub of India, with significant manufacturing exposure, including textiles, chemicals, fertilizers, and leather goods. Delhi’s service sector has also grown enormously in recent years, with expansion in information technology, telecommunications, and banking.
Projects piloting risk reduction in the city—through building retrofits or enhanced building inspections—have been underway and offer some degree of comfort that the seismic risk issues in Delhi are being acknowledged.
We will continue to monitor the situation in Nepal. If you have questions about the disaster please feel free to ask them in the comment section.