Property analytics company CoreLogic has assessed the financial implications of the HayWired earthquake scenario, a study that modelled the impact of a hypothetical magnitude 7.0 earthquake along the Hayward fault, finding that property damage could total US $170 billion – most of which would be uninsured.
USGS satellite photo of the San Francisco Bay Area
The Haywired scenario calculated the potential impact of a Hayward fault earthquake on the surrounding San Francisco Bay Area, and was developed by the U.S Geological Survey (USGS) with contributions from the California Earthquake Authority (CEA) and other partners.
CoreLogic determined that shaking from the earthquake would visibly damage over a million homes, and would cause an estimated $170 billion of property damage.
Additionally, CoreLogic estimated that only 10% of residential earthquake losses would be re/insured, and calculated that re/insured losses would total $30 billion, amounting to just 20% of overall losses and leaving a protection gap of $140 billion.
Tom Larsen, Industry Solutions Principal for CoreLogic, said: “The HayWired scenario is not a prediction of events to come, but it is a realistic portrayal of a series of earthquakes that could credibly occur along the Hayward fault.
“Our analysis evaluates the interaction between the physical aftermath of the events, with earthquakes and aftershocks occurring over time, and the financial world of insurance policies.
“Assessing that interaction can help determine how such a catastrophic event, in conjunction with the low penetration rate of residential and commercial earthquake insurance, can have significant and long-lasting damage on the people and economy of the region.”
Ken Hudnut, USGS Science Advisor for Risk Reduction and one of the lead authors of the HayWired Scenario Report, also commented: “The USGS and key industry leaders have worked together to anticipate the impacts of a hypothetical magnitude 7.0 earthquake on the Hayward fault, before it happens, so that people can use the latest science as they work to get even better prepared.”
Property losses from a Hayward fault earthquake are potentially so huge because of the prevalence of older buildings in the Bay Area, which were constructed before California adopted more stringent building codes in 1979.
Older houses are at risk of sliding off their foundations during an earthquake, although options like brace-and-bolt seismic retrofitting, which reinforces a house’s walls and secure its frame to the foundation, can reduce this risk.
Laurie Johnson, CEA Strategic Risk Advisor and a lead author of the HayWired scenario, said: “To avoid the cascading, long-term recovery challenges that catastrophic damage to houses would bring after a major Bay Area earthquake, we must accelerate either retrofitting or replacing the region’s extensive stock of seismically vulnerable housing, and encourage greater take-up of residential earthquake insurance.”
