Reassessing Risk


The economic impact of an earthquake can extend beyond the physical damage itself, and risk managers are using that new understanding to reconsider their exposure.


“I see a number of clients working with their broker partners right now to really shift some of the earthquake capacity they purchased to other places that heretofore they weren’t thinking so much about based on the fact that there is now a far better known tsunami exposure in addition to a contingent supply chain issue.” Erik Nikodem, Lexington Insurance


In the wake of the 2011 Japan earthquake, risk managers and underwriters alike have been reevaluating exposures, especially with respect to the tsunami and the global supply chain disruption. Even businesses that did not suffer physical damage from the earthquake experienced an economic impact because they relied on or were otherwise connected to suppliers that were affected by it.


While the large earthquakes in Japan and other countries should have increased demand for earthquake insurance or increased earthquake limits in the United States, that has not occurred, even in the vulnerable Pacific Northwest. Part of the reason is the economic stresses that many companies are experiencing. Still, earthquake rates in California and the Pacific Northwest remain depressed even as they are rising significantly throughout the Asia- Pacific region.


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