Swiss Reinsurance Report on Earthquake Risk in Eastern Canada

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By Diarmuid O'Dea

 

The Swiss Reinsurance company, commonly called Swiss Re, issued a report July 11 saying that "Earthquakes in the east (of Canada) tend to be of lower magnitude than in the west (of Canada), but their loss-inflicting potential, particularly in southern Quebec and eastern Ontario is huge"

The Swiss Reinsurance Company is the world's second largest resinsurance company and has been in business under one name or other since the mid-nineteenth century.  The company has annual revenues of $33B US. It has 14,000 employees and total assets of $215B US. It has more financial strength than most governments. 

Swiss Re is mostly concerned about the woefully low rate of household earthquake insurance participation in eastern Canada. In British Columbia, almost 65% of homeowners have earthquake insurance whereas in eastern Canada and in the province of Quebec in particular it's less than 5%. There is probably a belief in Quebec that the government will step in and assist homeowners, but the amount of help will never meet the need if there is a 7.0 or 8.0 magnitude earthquake.

Swiss Re has extensive experience working with the California Earthquake Authority the coordinating body for earthquake insurance in California. After a significant earthquake in the 1990s, insurance companies, because of significant losses, stopped offering earthquake insurance in California. This decision led to a significant drop in housing values and temporarily crashed the housing market. The state of California stepped in and established the financially independent California Earthquake Authority that became the guarantor of earthquake insurance in the state. This returned stability to the California housing market. Most likely Swiss Re is hoping that the government of Quebec or Canada will create a similar institution before a catastrophic earthquake shakes out the housing economy in eastern Canada and maybe all of Canada. 

Ottawa sits on the Ottawa River and Quebec City and Montreal sit on the St. Lawrence River. Both rivers flow through ancient faults left as the North Amercan plate moved west. There have been numerous major earthquakes in the area over the last few centuries, but this was long before they were major population centers. Experts are especially concerned about this region because there hasn't been the same degree of seismic upgrading as in British Columbia.

 

Quebec Earthquake Threat

 


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