A recent Swiss Re report highlighted the vulnerability of Eastern Canada to earthquake risk where it said a lack of awareness has led to a high protection gap in a region vastly exposed to high economic and social losses in the case of a major earthquake.
A magnitude 7.3 earthquake in the Charlevoix seismic zone near Quebec City could cause private residential property losses of up to CAD 10.6 billion, (U.S. $8.3 billion) and a repeat of the 1732 earthquake in Montreal of magnitude 5.8 could lead to staggering losses of up to CAD 45 billion, (U.S. $35.3 billion) according to Swiss Re’s in-house catastrophe model.
Swiss Re said; “the unfortunate reality is that a large majority of these losses would be uninsured because the take up of earthquake insurance among households in eastern Canada is very low: just 3.4% of homeowners in the east have cover, compared with 65% in Vancouver/Victoria in British Columbia.”
Typically, Swiss Re said, awareness of earthquake risk is higher in Western Canada, however three of the country’s biggest cities Montreal, Ottawa, and Quebec City in Eastern Canada are in seismically active zones.
Despite 70% of the Quebec population living in high hazard zones, 90% of residents are unaware of the risk, according to an Insurance Bureau of Canada survey.
Swiss Re advised re/insurers to step up efforts to raise awareness of the benefits of insurance as security against post-disaster loss of assets; “Earthquake insurance products are available in the market but for varying reasons, the take-up rate among eastern Canada’s households remains low.
“It does not help that there is not much public discussion of the hazard. The population expects government to set priorities based on assessed risks, and if earthquake risk is not spoken of nor prepared for, it follows that the public does not conceive of the risk as being very real or imminent.”
Insurers and reinsurers offering earthquake cover in Canada could lower the cost of disaster risk mitigation for government and individuals and creating a more resilient society while increasing market demand.
“Examples from many places in the world demonstrate that earthquake insurance lowers the cost of disaster risk management for society at large.
“The industry has all the tools required to innovate in product design and distribution to make earthquake cover more affordable and appealing, and so help society become more resilient,” said Swiss Re.