Missouri Earthquake Report Shows State’s Insurance Coverage Imbalance at Critical Tipping Point

 

Insurance regulators’ findings indicate coverage crisis in southeast Missouri

 

The value of uninsured residential properties for earthquake damage has nearly eclipsed the value of insured properties in Missouri, insurance regulators are warning.

According to the 2015 Earthquake Report released by the Missouri Department of Insurance (“MDI”) today, August 11, 2015, insured residential properties in 2014 totaled $101 billion, while uninsured residential property damage from a magnitude 7–7.9 earthquake is estimated at $100 billion.

To go directly to today’s MDI Earthquake Report, click here.

“Uninsured property losses of $100 billion would undoubtedly jeopardize our state’s ability to recover after an earthquake.  An uninsured loss of this magnitude would likely necessitate a significant infusion of public funds, the likes of which we have never seen,” said MDI Director John M. Huff.  “Our state is now at a critical juncture in terms of transferring this risk to the private sector insurance industry.”

Director Huff said Missouri has seen firsthand how insurance can fuel economic and physical recovery following a natural disaster.

“Following the Joplin tornado, we saw $1 billion in claims paid within the first 100 days,” he added.  “These funds enabled this devastated community to begin the recovery process.  Without a financial infusion from the insurance industry, a recovery of this magnitude would have been even more difficult.”

According to MDI data, 562,734 residences not covered for earthquake losses are located in counties rated seven or higher on the Mercalli scale, which measures vulnerability to earthquakes.  Missouri is the third-largest market for earthquake insurance among states, exceeded only by California and Washington.  In some counties with the highest risk of catastrophic earthquake damage, 80 percent of the homes are uninsured.  In 18 of Missouri’s 114 counties, less than 10 percent of homes have earthquake coverage. 

On average, premiums in the six counties that comprise the New Madrid area increased by more than 500 percent between 2000-2014, and in one county by nearly 700 percent.  In 2000, more than 60 percent of homes in the New Madrid area had earthquake coverage.  By 2014, the rate of coverage had plummeted to 20 percent.

A study by the U.S. Geological Survey estimates the probability of a magnitude 7.5 or greater earthquake in the New Madrid zone over the next 50 years is 7-10 percent.  The probability of an earthquake exceeding magnitude 6 over the same period is 25-40 percent.  A joint assessment by the Mid-America Earthquake Center of the University of Illinois and the Federal Emergency Management Agency predicts the New Madrid event could constitute the highest total economic loss of any natural disaster in U.S. history.

 

NAIC Earthquake Study Group To Review U.S. Seismic Hazard Mapping

The National Association of Insurance Commissioners’ (“NAIC’s”) Earthquake Study Group will convene during the NAIC Summer 2015 National Meeting on Saturday, August 15 from 2-3 p.m.  During this meeting, members will:

 

• Hear a presentation from Dr. Kyle Murray of the Oklahoma Geological Survey providing an overview of historic versus recent seismic activity in the contiguous U.S.  The presentation will also discuss plate tectonics, major fault zones and anomalous events that have resulted in benchmark scientific studies and influenced U.S. seismic hazard mapping.
• Hear from Senior Attorney Gordon Amini of the Oklahoma Insurance Department on Oklahoma’s Notice Issued to Protect Oklahomans Who Have Earthquake Insurance
• Discuss the NAIC’s “All Things Earthquake” event (which will have already taken place on August 14) 

 

To access the agenda, click here.  The meeting materials have not yet been posted.

 

 

 

Should you have any questions or comments, please contact Colodny Fass.

 

 

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