Insurers project next San Francisco Great Quake losses up to $105 billion

Business Wire

April 3, 2006

OLDWICK, N.J. -- (BUSINESS WIRE) -- As the centennial anniversary of the Great San Francisco Earthquake and Fire of 1906 approaches, insurers are asking: What if it happened again?

The April issue of Best's Review reports that if a similar earthquake occurred today, insured losses could reach $105 billion.

Risk management firm Eqecat predicts insured losses likely would reach $30 billion to $40 billion, Risk Management Solutions estimates $80 billion to $105 billion, and AIR Worldwide said insured property losses would reach nearly $80 billion.

In a 2006 scenario, however, insurers have the advantage of catastrophe modeling, which evolved out of the science and research that developed in response to the 1906 quake. They also reap the benefits of significant risk mitigation efforts, including updated building mandates from the International Code Council and a modern fire-fighting infrastructure.

Most of the damage in 1906 came from the fire following the earthquake.

Offsetting some of insurers' advantages is the significant increase in the number and value of insured properties. AIR Worldwide estimates the current value of residential and commercial properties within the damage footprint of the 1906 quake at more than $1.6 trillion.

Best's Review is published by A.M. Best Co., for insurance professionals, including home office executives, agents, brokers and others who are affiliated with the industry, including bankers, lawyers and educators.

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