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NEWARK, Calif. - October 13, 2014 According to RMS, the world’s leading catastrophe risk management firm, earthquake risk in the San Francisco Bay Area is on the rise while earthquake insurance penetration statewide has dropped significantly since the Loma Prieta earthquake that rocked the Bay Area 25 years ago, causing nearly $6 billion in economic losses. As a result, the next “big one” has potential to be financially devastating to the Bay Area economy, according to RMS analysis.

A worst-case, magnitude 7.9 earthquake on the San Andreas Fault could strike an urban center with 32 times the destructive force of Loma Prieta, potentially causing commercial and residential property losses over $200 billion. Residential earthquake insurance penetration in California, which would be vital to facilitate rebuilding after an earthquake, has dropped by more than half since Loma Prieta, with only 10 percent of households currently covered. Without insurance, homeowners may walk away from their homes after an earthquake if the residual value of their property is less than the outstanding value of their mortgage. Even those with insurance are likely to struggle to meet high deductibles, potentially leading to significant blight and disrepair in badly damaged neighborhoods.

“The Bay Area has made significant progress in terms of infrastructure preparedness and retrofitting, but without significant earthquake insurance penetration to facilitate rebuilding, the recovery from a major earthquake will be considerably harder,” said Dr. Patricia Grossi, earthquake expert and senior director of model product management, RMS. “Now is the time for Bay Area residents to come together to develop innovative approaches and ensure resilience in the face of the next major earthquake.”

The magnitude 6.9 Loma Prieta earthquake on October 17, 1989 caused 63 deaths, injured 3,757 people, destroyed more than 11,000 homes leaving 12,000 individuals displaced and caused $6 billion in property damage.

It was an unusual event; while the earthquake was centered almost 50 miles from San Francisco, liquefaction of reclaimed land in parts of San Francisco and Oakland elevated the impact and proved a significant factor in the overall $6 billion in loss. Liquefaction from earthquakes still poses a significant threat to buildings situated around the San Francisco Bay.

There is a 63 percent chance that a magnitude 6.7 or larger earthquake will hit the Bay Area over the next 30 years, according to the United States Geological Survey. The next major earthquake could strike much closer to urban centers than Loma Prieta, with more destructive force. 

According to RMS modeling, the most likely location of the next big earthquake to impact the San Francisco Bay area is on the Hayward fault, which could reach a magnitude of 7.0. The area is also at risk of an earthquake on one of the many other faults in the area. For example, an earthquake on the San Andreas fault could reach magnitude 7.9 could cause commercial and residential property losses surpassing $200 billion. A cluster of smaller earthquakes could also impact the area, which, sustained over months, could have serious implications for the local economy.

While the Bay Area has become more resilient to damage from shaking, liquefaction still presents a very major risk, in particular in low-lying parts of San Francisco and Oakland.

The risk for loss of life, property and prosperity are higher than ever in the San Francisco Bay Area. Since 1989, the population of the region has grown 25 percent, the value of residential property has sky rocketed 50 percent, reaching $1.2 trillion, and commercial activity has significantly expanded. The Bay Area is now the most productive economy in the U.S. with a gross domestic product of $535 billion, ranking 19th in the world compared to national economies.

While earthquake insurance penetration remains low, a magnitude 7.0 earthquake rupturing on the Hayward fault could produce $25 billion in insured loss across residential and commercial lines of business. Commercial earthquake policies provide cover for damage to buildings, contents and business interruption. Substantial claims could also arise under other lines of coverages, however, such as fire, workers compensation and even general liability.

 More information can be found at http://rms.com/lomaprieta. Experts on earthquakes and catastrophe risk management are available for comment by contacting pr@rms.com.

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Sally is another example of how hurricane damage can take many different forms”, said Jeff Waters, senior product manager, RMS North Atlantic Hurricane Models.  This estimate includes wind, storm surge, and inland flood losses across parts of the Gulf and Florida regions, based on analysis of RMS ensemble footprints in Version 18.1 of the RMS North Atlantic Hurricane Models and estimates from the RMS U.S. Inland Flood HD Model. RMS ensemble footprints are reconstructions of Sally’s hazards that capture the uncertainties surrounding observed wind speeds and storm surge. Losses reflect property damage and business interruption to residential, commercial, industrial, and automobile lines of business. Estimates include post-event loss amplification (PLA) and non-modeled sources of loss. RMS expects the majority of insured losses will impact residential lines. The estimate also includes losses to the National Flood Insurance Program (NFIP), which RMS expects to reach US$400 million to US$800 million. NFIP losses were derived using an RMS view of NFIP exposure based on the 2019 policy-in-force data published by FEMA, the Version 18.1 North Atlantic Hurricane Models, and the U.S. Inland Flood HD Model. “We expect Sally to be a sizable event for the NFIP. The majority of NFIP take-up occurs in coastal counties, especially in the states most impacted by the hurricane, notably Alabama and Florida. However, the inland extent of heavy rainfall from this event means we’ll likely see NFIP losses stemming from inland flood as well,” said Rajkiran Vojjala, Vice President, Model Development.  Sally made landfall near Gulf Shores, Alabama on Wednesday, September 16, 2020 as a Category 2 hurricane on the Saffir-Simpson Hurricane Wind Scale. At landfall, Sally produced sustained winds of 105 mph (170 km/h), according to the National Hurricane Center. 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About RMS

Risk Management Solutions, Inc. (RMS) helps insurers, financial markets, corporations, and public agencies evaluate and manage global risk from natural and man-made catastrophes, including hurricanes, earthquakes, floods, climate change, cyber, and pandemics.

RMS helped pioneer the catastrophe risk industry, and continues to lead in innovation by marrying data and advanced model science with leading-edge SaaS technology. Leaders across multiple industries can address the risks of tomorrow with RMS Risk Intelligence™ (RI), our open, unified cloud platform for global risk, enabling them to tap into RMS HD models, rich data layers, intuitive applications, and APIs.

Further supporting the industry's transition to modern risk management, RMS spearheaded the Risk Data Open Standard (RDOS), a new modern open standard data schema designed to be an extensible, flexible, and future-proof asset within modeling/analysis systems.

RMS is a trusted solutions partner enabling effective risk management for better business decision making across risk identification and selection, mitigation, underwriting, and portfolio management.

Visit RMS.com to learn more and follow us on LinkedIn and Twitter.

Media Contacts

Matthew Longbottom

PR Lead, EU and APAC
+44 20 7444 7706 prteam@rms.com

Devonne Cusi

PR Lead, Americas
+1 551 226 1604 prteam@rms.com
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