According to earthquake monitoring centers around the world, earthquakes are more frequent than many people imagine and the vast majority of countries are not prepared to reduce the damage caused, through insurance coverage or more resilient construction technologies.
Mitigating the consequences of accidents and natural disasters is just one of the topics that will be discussed at the 38th Western Hemisphere Insurance Conference, FIDES Rio 2023, which will bring together representatives of private insurance organizations from 20 Latin American countries, plus the United States and Spain, in Rio de Janeiro, from September 24 to 26, 2023.
One of the international meeting’s eight thematic areas is “Climate Change: Risk Mitigation and Development of New Solutions.” The conference’s central theme is “Insurance for a More Sustainable World.”
Between December 15 and 20, 2022, to take just one example, there were at least 12 tremors of varying magnitudes, with epicenters outside the most densely populated areas and without significant damage. Ecuador, Peru, the United States, Japan and New Zealand are some of the countries where these recent earthquakes took place. In Latin America, Chile and Mexico have had some traumatic experiences of earthquakes.
Specialists are worried about the low level of protection, in view of the extraordinary damage that earthquakes can inflict, depending on their intensity and their epicenter. Japan and Portugal provide two vastly different examples in terms of security.
Technology favors protection
Japan, a country that has a history of earthquakes and well-developed technologies to mitigate their effects, incurred losses equivalent to R$333 billion from its earthquake of March 11, 2011, including the tsunami that followed it. The damage would have been even greater were it not for the Asian country’s stringent construction code and multi-billion investments in new technologies, resulting in highly robust infrastructure.
Japan’s buildings are prepared to move in any direction, as they have electronic dampers (in new buildings) or spring dampers (in old ones). These dampers make structures more resistant by protecting the joints between columns, slabs and steel structures on each floor.
Another tragic earthquake, measuring 9.1 on the Richter Scale, occurred off the west coast of Sumatra, Indonesia, in 2004. A tsunami following the tremor hit 14 countries in South Asia and East Africa. About 230,000 people died or went missing.
High exposure to earthquakes
In Portugal, the situation is different, writes José Leão, reinsurance director at Grupo Ageas Portugal, in an online article. According to him, Portugal is one of the most unprepared countries to withstand a high-magnitude earthquake and, even worse, among the most likely to experience this type of incident.
Portugal’s history is frightening. In addition to the historic earthquake of 1755, there was a major earthquake in 1969 in the south of the country and in Lisbon. The magnitude was close to 8 on the Richter Scale. There have recently been several other earthquakes measuring at least 7 on the Richter Scale. “We are very exposed to seismic damage, because unlike many other countries, Portugal does not have any structured national system to guarantee financial protection for citizens and companies in the event of this type of event,” he says.
Guarantee for assets
“Nations like the United States, Japan and New Zealand, as well as European countries like Norway, France and Spain, are more advanced in terms of asset protection, thanks to official guarantee systems in the event of a catastrophe,” Leão adds.
According to him, although coverage for earthquake damage is offered by private insurance companies, taking it out is optional. Even in the case of buildings that require insurance, the law does not provide for seismic risks. As a result, earthquake insurance coverage is low. Since 2018, the Portuguese Association of Insurers has been trying to make earthquake coverage mandatory in fire and multi-risk insurance. It has proposed distributing the risk between policyholders, insurers and reinsurers, while having a relief fund backed by the state and the private sector.