Earthquakes - Deadly risk, devastating damage

Loss prevention can save lives

US$ 210bn

The costliest natural catastrophe of all time: the 2011 Tohoku earthquake caused the Fukushima nuclear disaster in Japan

Earthquakes are the deadliest natural hazard and cause extreme damage. They are impossible to predict and warnings come only moments before the shock waves arrive. The focus of prevention must therefore be on earthquake-resistant buildings and infrastructure, which offer the best-possible protection to human life.

The facts:

Half of all natural disaster fatalities worldwide since 1980 have been due to earthquakes – either as a result of powerful tremors or resulting tsunamis.

The 2011 Tohoku Earthquake off the coast of Japan remains the costliest natural disaster of all time, with overall losses of US$ 210bn. As a result of the magnitude 9.0 earthquake, a tsunami destroyed numerous coastal towns and caused the Fukushima nuclear disaster.

One of the most destructive earthquakes occurred along the Turkish-Syrian border in February 2023. On the East Anatolian Fault, devastating tremors occurred over an area half the size of Germany. According to the USGS (United States Geological Survey), the strongest tremors were magnitude 7.8 and 7.5. Tens of thousands of people were killed.

What types of earthquakes are there?

More than 90% of all earthquakes occur in regions where large tectonic plates meet. Many active volcanoes are also located along these faults. In convergent zones, oceanic plates slide beneath continental plates. This is called a subduction zone, for example off the Pacific coast of South America or off Japan.

In the case of transform faults, on the other hand, tectonic plates slide past each other horizontally. An example of this is the San Andreas Fault in California. In Turkey, the Eurasian and Arabian continental plates are slowly pushing the Anatolian plate westward – this was what caused the latest series of earthquakes in the region.

Where do the strongest earthquakes occur?

Convergent zones produce the strongest earthquakes (Chile, 1960; Sumatra, 2004; Japan, 2011), followed by transform zones (San Francisco, 1906; Turkey, 2023) and divergent zones. The hypocentre of quakes on convergent plate boundaries is often in the sea. However, they do pose a significant risk of tsunamis.

What is pushing earthquake losses up?

The losses generated by an earthquake are determined not only by the earthquake parameters themselves (magnitude, distance, duration) and the local subsoil conditions, but also by the structure of the affected buildings. The February 2023 earthquake in Turkey once again demonstrated the vulnerability of the region’s building stock.

Stronger earthquakes also frequently cause knock-on effects with high loss potentials. These include tsunamis, like the one caused by the 2004 Sumatra earthquake, with around 200,000 deaths, or by the 2011 earthquake off the coast of Japan. They can also cause landslides, subsidence and ground liquefaction, often with extremely high property losses.

Loss prevention is key

The most important loss prevention measure is the solid and robust construction of buildings and infrastructure, so that they can withstand the enormous forces of strong earthquakes. This is usually regulated by national building codes, which often only apply to new builds. The main aim of such building codes is to protect human life. They ensure structural stability whilst accepting that some property damage may occur. However the new generation of building codes, such as those in use in the United States, Japan and New Zealand, also endeavour to reduce property damage. Planning measures such as deliberately avoiding highly exposed areas are often ignored, though.

Insurers must accurately assess earthquake hazards

There are many areas with high concentrations of values and population that are also located in zones of very high seismic activity. For the insurance industry, the possible loss accumulation in such areas is proving to be a key challenge. This makes it all the more important to be able to assess the earthquake risk very accurately. Only on this basis can premiums for any insurance cover be calculated correctly and risks managed. Insurers also contribute to reducing losses when, for example, they insist on structural improvements or land-use restrictions before underwriting risks.

Earthquake insurance is usually sold as an add-on to traditional fire cover or as a component of an EC (extended coverage) policy. Substantial deductibles are intended to limit loss accumulations and are a prerequisite for covering earthquake risks. Compared with windstorm cover, the insurance density of earthquake cover is – much like flood cover – relatively low in global terms.

Poorer countries in particular require a massive increase in earthquake insurance in order to lessen the personal financial impact of quakes and speed up reconstruction. One model could be the Turkish Catastrophe Insurance Pool (TCIP), which, as compulsory homeowners’ insurance, ought to cover a considerable proportion of the damage to buildings caused by the most recent earthquake in Turkey. Since the TCIP was set up, the market penetration of homeowners’ insurance against earthquake damage in Turkey has increased nationwide to more than 50%.

Nevertheless, the aim of such insurance pools is to achieve an even higher insurance penetration through suitable provisions. With its expertise, the insurance industry can also help to ensure that loss mitigation measures are implemented and enforced.

GEM earthquake map — The Global Earthquake Model makes it possible to evaluate the earthquake risk in every country

Since 2007, Munich Re has also supported the Global Earthquake Model (GEM), a joint initiative of leading geo research centres, the private sector and international organisations. Its main objective is to draw up a risk model for each country, thus making it possible to estimate loss potentials and the benefits of loss prevention measures, and ultimately increase insurability.

Solutions for assessing and managing earthquake risks

Munich Re systematically records the risks from earthquakes and is working on initiatives to make buildings and infrastructure more robust. At the same time, people’s financial protection can be improved through the expansion of insurance, especially in exposed emerging and developing countries.

Benefit from our decades of experience in assessing geophysical risks. Munich Re can offer solutions to meet your specific challenges.

Find out more about the global earthquake risk map

Solutions for assessing and managing earthquake risks

Munich Re systematically records the risks from earthquakes and is working on initiatives to make buildings and infrastructure more robust. At the same time, people’s financial protection can be improved through the expansion of insurance, especially in exposed emerging and developing countries.

Benefit from our decades of experience in assessing geophysical risks. Munich Re can offer solutions to meet your specific challenges.