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Earthquake focus—Swiss Re


EARTHQUAKE: THE BIGGEST NATURAL THREAT TO CHINA


China’s rapid economic growth, combined with its propensity to severe earthquakes, makes for a potentially costly and devastating scenario, as Dr Nicolas Georgy of Swiss Re explains.


F


ast economic growth in China has led to an explosion of property values in many areas exposed to natural hazards, including earthquakes. In terms of the financial loss potential, this growth in


values outweighs any technological improvements or preventive measures aimed at reducing the financial impact of natural catastrophes—a trend that is likely to continue for some time to come.


How costly could a major earthquake in China turn out to be? Based on key


economic figures, government statistics and insurance market research, Swiss Re has estimated the total economic loss could exceed 1,000 billion CNY.


However, the insurance protection against earthquake risks is very low.


This article tries to illustrate the potential exposure, possible solutions and key challenges for the insurance industry to deal with that risk.


EARTHQUAKE AS A THREAT Among all natural


catastrophe During the last century, earthquakes claimed more than half a million


lives in China. The world’s most deadly recorded earthquake occurred in 1556 in western China’s Shaanxi Province and is believed to have led to 830,000 fatalities. In 1976, an earthquake devastated the city of Tangshan, 150km east of Beijing, claiming more than 240,000 lives.


Looking at the full historical earthquake record, certain distinct zones


of elevated earthquake activity can be identified in China (Figure 1). To the southeast, prominent in terms of both earthquake severity and frequency, is the island of Taiwan, located on the converging boundary of the Philippine and Eurasian tectonic plates.


In the western and southwestern parts of China, widespread earthquake risks, earthquakes can generate


tremendous losses. They represent the largest single threat in terms of both human and economic consequences.


52 | INTELLIGENT INSURER | October 2011


activity is due to the continual collision of the Indian subcontinent into the Eurasian plate. Between these two areas lies the main Chinese land mass, which holds the bulk of the country’s population. The northern part of the country is criss-crossed by a series of active intra-plate faults, some of which were responsible for the highly destructive earthquakes mentioned above. By comparison, southeastern China has relatively low seismic activity.


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