Finding Fault: Keys To Confronting Earthquake Risk

Technology’s Growing Role In Addressing Seismic Risk

A growing number of technologies help address earthquake risks and responses.

Seismic Sensors

An emerging technology, seismic sensors learn the natural frequency of a building and can predict damage moments after an earthquake occurs.

Data from the sensors can provide information about structural damage, financial loss and recovery time for an individual building or a portfolio of properties. That information can improve senior executives’ situational awareness, helping them set recovery priorities as well as with insurance claims processing.

“Such technology can be considerably more reliable than having an untrained code-enforcement person looking for cracks in a building,” says Crenshaw.

In fact, a recent retrofit of the I-40 bridge crossing the Mississippi River in Memphis included installing motion accelerometers and seismometers.

In fact, a recent retrofit of the I-40 bridge crossing the Mississippi River in Memphis included installing motion accelerometers and seismometers.

AI and Machine Learning

Artificial Intelligence (AI) and machine learning can also help determine the extent of damages after an event and provide insights into building safer structures for the future. By comparing baseline satellite images from before an earthquake with those from immediately after, a computer program can assess damages, as well as identify buildings that might have been unaffected or less damaged.

Public-Warning Apps

Several at-risk regions are developing early warning systems and apps to notify the public of an impending earthquake. In October, California announced its MyShake smartphone app to provide users United States Geological Survey ShakeAlerts in the seconds before an earthquake hits. Likewise, in its effort to improve earthquake preparation, Mexico City has updated its emergency app to send earthquake alerts to users.

Partnering To Protect Critical Infrastructure

The nature of earthquake risk puts a premium on public–private partnerships. Neither businesses nor governments can completely address the risk alone.

Insurance coverage typically focuses on buildings, not infrastructure. A business can take proper steps to protect its facilities, but it can still be disrupted if there is damage to key infrastructure such as roads, bridges, airports or even power or phone lines. Add to that increasingly connected networks, and an impact to a supplier or third party could also disrupt business operations.

“A major quake in the central U.S. could likely affect every business in the country,” says Crenshaw.

The risk to critical infrastructure highlights the need to look beyond traditional channels to help mitigate exposures.

New Zealand

The Christchurch earthquake in February 2011 underscored the potential impact of a seismic event on infrastructure. “All of a sudden you can’t use systems critical to everyday life, such as turning on water to cook or bathe,” says Sam Ketley, senior executive director at Aon New Zealand.

The event further demonstrated the protection gap – economic losses versus what was covered by insurance. “The level of damage was unforeseen,” Ketley says. “The declared loss expectancy for Christchurch pre-event was about $40 million. The total loss was actually more than $1 billion for infrastructure.”

Since the 2011 quake, municipal councils in New Zealand have successfully worked alongside their insurance partners and third-party experts to understand the risks their cities face and discern what sort of protection is available from insurance markets.

“The subsequent aftershocks have given us vast amounts of data around the amount of damage caused to horizontal infrastructure that we’ve been able to apply to other parts of New Zealand to better protect our communities,” Ketley says.

Pacific Alliance

On the other side of the ocean, Mexico, Chile, Colombia and Peru have been hit by 68 earthquakes at 6.8 magnitude or higher over the past 25 years. These countries, which align a major fault line, form the Pacific Alliance and have been working with the World Bank to arrange emergency financing in advance of a catastrophe.

The mechanism behind that financing involved the World Bank issuing the world’s second-largest earthquake catastrophe bond in 2018 to back nearly $1.4 billion in earthquake insurance for the four countries. Investors who purchased the bonds received a return commensurate with the risk. During the term of the bonds, the World Bank uses the funds to finance its sustainable development goals around the world.

Translating Seismic-Risk Awareness Into Better Preparation

It’s human nature to be more aware of a frequent risk. Yet with the potential scale of earthquake losses around the world, it’s essential to prepare whether earthquakes happen regularly or rarely.

Businesses, governments and other organizations can work together to use new technologies and financing techniques to help address earthquake risks, thus reducing losses and speeding recovery time when seismic events do occur.