Seismic maps being revised this year to reflect greater understanding of the forces behind earthquakes provide a tool to improve disaster risk mitigation and add a valuable factor in property insurance underwriting and pricing.
At times, though, as in areas of Los Angeles, revised maps can surprise property owners, revealing previously unknown proximity to earthquake fault lines. That occurred when a preliminary California map, released early this year, showed more than 1,500 properties, including schools, hotels and homes, were built along a Hollywood fault.
The U.S. Geological Survey prepares National Seismic Hazard Maps for the lower 48 states about every six years, and the latest update is expected in September, said Sue Perry, disaster scientist in the USGS' Science Application for Risk Reduction Project in Pasadena, California.
Insurers and catastrophe risk modelers will closely examine the updated seismic maps to determine if their models need to be revised and underwriters eventually will adjust property coverage pricing by factoring in the seismic threats gleaned from the updated maps.
“The USGS Seismic Hazard Maps form the basis of the U.S. earthquake models so when these maps are updated, the catastrophe models will be revised,” said Karen Clark, president and CEO of Karen Clark & Co., a risk modeling firm in Boston.
Property insurers explained why the seismic maps are critical to the insurance industry and how underwriters use them.
“The USGS seismic hazard maps are really the foundation on which a lot of building codes and emergency managers build on,” said Lou Gritzo, vice president of research at FM Global's Center for Property Risk Solutions in Norwood, Massachusetts.
FM Global uses the seismic maps as “the authoritative source'' for ground motion information as well as soil maps and structural analysis in devising its own earthquake risk maps used in underwriting and discussions with customers about risk mitigation strategies, Mr. Gritzo said. If FM Global revises its risk maps, “our underwriting would be revised accordingly,” he said.
The effect of revised U.S. seismic maps on insurance pricing and underwriting will come after insurers evaluate the changes, said Martin Allemann, head of catastrophe underwriting and pricing for general insurance at Zurich Insurance Group Ltd. in Zurich.
“I'm sure that once the USGS revision gets implemented into RMS' and AIR's (catastrophe risk) models it will ultimately filter into pricing,” said Alexandra Glickman, area vice chairman and real estate and hospitality practice leader at Arthur J. Gallagher Risk Management Services Inc. in Glendale, California.
Ms. Clark said it probably will take two years after the seismic maps are finalized before risk modelers will incorporate any model revisions based on the earthquake risks identified by the maps.
The fresh seismic hazard maps later this year are the product of an extensive process that seeks to gather the latest knowledge on seismic conditions through various workshops and discussions around the country.
“Any documentable evidence is thoroughly considered in the process of putting these maps together,” said Chris Cramer, research associate professor at the Center for Earthquake Research and Information at the University of Memphis in Memphis, Tennessee. “The results are reviewed by a broad spectrum of peers.”
“They consider a range of information, for example, results from field studies, computer simulations and methods to extrapolate from the data we have to an estimation of what the future holds,” Ms. Perry of the USGS said. “They look at ground shaking and earthquake recurrence rates, fault rupture characteristics, discoveries of new faults and more. The considerations always include experience from recent large earthquakes around the world.”
The process is helped by the EarthScope USArray, which includes hundreds of seismic sensors across the United States intended to improve understanding of the Earth's structure and how strains and stresses are distributed across regions, Mr. Cramer said.
Among other things, that sensor array is improving knowledge of the New Madrid Seismic Zone in the central part of the country, he said.
While the area around New Madrid, Missouri, was sparsely populated when a series of serious earthquakes shook what's now known as the New Madrid Seismic Zone in late 1811 and early 1812, a repeat of the 7.7 magnitude quake that struck in February 1812 would cause more than $100 billion in damages today, according to modeler AIR Worldwide.
While some think that small earthquakes experienced in the region today are merely aftershocks of the 1811-1812 seismic events, a study released earlier this year by two USGS researchers concluded that recent activity in the New Madrid zone is the result of processes that continue to build stress in the region that will eventually be released in a large earthquake.
The updated USGS maps also are expected to reflect improved knowledge of the Pacific Northwest's Cascadia Subduction Zone, reflecting recognition of its potential to produce very serious earthquakes, FM Global's Mr. Gritzo said.
Brian Murphy, head of specialty property product underwriting at Zurich North America in Schaumburg, Illinois, said: “Obviously, the maps are updated periodically, which would show either reduced or increased probabilities of earthquakes in various areas of the world.
“Based on that awareness, that might encompass changes in guidelines in areas that maybe weren't a concern before,” Mr. Murphy said. “Longer term, it would be incorporated into the predictive models that companies use that would be incorporated into pricing further down the line.”