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Sitting in the shadow of volcanic risk

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Any discussion of volcanoes may conjure up B-movie images of distant tropical islands, but analysts say a volcanic eruption may be closer than many people realize.

Last month, Swiss Re Ltd. announced that it had developed a global volcano model that assesses risks in over 500 active volcanoes. 

The reinsurer said that one in seven of the world's largest urban areas, encompassing over 1 billion people, are located within a 150-kilometer, or 93-mile, radius of an active volcano, and some of the largest cities are at risk of total economic losses of up to $30 billion. 

The top 10 exposed cities include Tokyo, Naples, Manila, Managua and Jakarta, Swiss Re said.

“We look into the past looking at the eruption history of those active volcanoes and from those derive future eruption scenarios,” said Patrice Tscherrig, Zurich-based earthquake specialist for Swiss Re. “We focus on the property damage, because you can evacuate people but you can’t evacuate your building or business.”

Businesses are not only exposed to property damage, but to business interruption as well Mr. Tscherrig added.

“Even if the business is completely intact, you might have to evacuate or your workers will have to evacuate,” he said.

The direct effects of volcanic eruptions include lava, mud and pyroclastic flows, glowing clouds, ash eruptions and ash deposits, and that losses can include disruption of air transport and shipping and crop failures, Munich Reinsurance Co. says on its website.

The 2010 eruptions of the Eyjafjallajökull volcano in Iceland created ash clouds that severely disrupted air travel across western and northern Europe for six days, and more than 100,000 flights were cancelled.

The 1991 eruption of Mount Pinatubo in the Philippines spewed an ash column more than 40 kilometers, or about 25 miles, high and produced avalanches of hot ash, gas and mud. Swiss Re said the eruption killed 875 people, left 250 000 people homeless, and that the severe damage caused by the eruption and its aftereffects disrupted the region’s economy for many years afterward.

Mark Bove, Princeton, New Jersey-based senior research scientist for meteorology, underwriting services and risk accumulation with Munich Reinsurance America Inc., said that in the United States, most property insurance policies cover volcanic eruptions, including the hazards of ash, dust, lava flow, fire, explosion and shockwaves. Business interruption coverage is also typically available via an endorsement.

“However,” Mr. Bove said in an email, “the gaps in volcanic eruption insurance coverage have to do more with the secondary perils of earthquake, landslides and mudflows than lava or explosive blasts.”

Earthquake coverage has to be purchased via an endorsement, and flood insurance, which would cover damage due to mudflows, typically has to be obtained via the National Flood Insurance Program, he said.

“Businesses are far more likely to be impacted by these secondary volcanic perils, yet very few businesses purchase earthquake and flood insurance,” Mr. Bove wrote. “Filling these coverage gaps would likely be the best way for businesses to make sure they’re fully prepared for the financial impacts of an eruption.”

Munich Re recently released its natural catastrophe analysis database, Munich Re NatCatService, a database for analyzing and evaluating natural catastrophes that includes data on natural catastrophes going back to 1980.

A 2015 study by the University of Manchester named Iwo Jima as the site of the most dangerous volcano in the world, saying that a large eruption would cause a tsunami that could devastate southern Japan and coastal China. 

Apoyeque in Nicaragua, located next to the capital of Managua, with a population of more than 2 million, was second on the list, followed by Campi Flegrei in Italy, which scientists said poses an even greater threat than Vesuvius, also in Italy, because it is closer to the city of Naples and has the potential for much larger eruptions.

Stephen Malone, professor emeritus at the University of Washington in Seattle, said there are “a significant and increasing number of people at risk from volcanic activity” as more houses are being built closer to volcanoes.

“You’ve got a good view,” he said, “and maybe the local city is polluted and you build on the side of a volcano. There’s an area near Mount Rainier, which had mostly been agriculture for a long time. And unfortunately against the better judgment of most of us in science, the zoning was changed to allow the building of homes there, and it went from an area that had a couple of thousand of people at risk to an area that has more than 10,000 people at risk now.”

Mr. Malone said that Mount Rainier will definitely erupt at some point and noted that hazards from the highest mountain of the Cascade Range exist beyond just eruptions.

“There’s a lot of ice and snow up there,” he said, “and it’s a pretty unstable, weak pile of rocks, and so a little shake or just spontaneous collapse of part of the volcano generates lahars, or volcanic mud flows.”

Lahars can reach great distances, Mr. Malone said, and travel many miles away from the volcanoes into valleys, “and pretty much wipe out everything in the valley.”

“That’s one of the major hazards from volcanoes,” he said. 

Mr. Tscherrig said volcanic eruptions have some precursory signals, such as ground deformation, earthquakes and gas emissions. Many of the active volcanoes worldwide are actively monitored, especially when there are nearby large population centers, he said.

Unlike earthquakes, Mr. Malone said, volcanoes do give signs of unrest before they erupt. 

“And this allowed saving of many, many lives in lots of places,” he said. “These are now monitored, and certainly with the hazardous volcanoes in most places, those signs of unrest can be recognized, anywhere from days to weeks or even many months, before it actually erupts, which gives people a chance to evacuate or prepare, much better than one can for earthquakes.”