Residents of southwestern British Columbia experienced a pair of late-February earthquakes — Feb. 21 saw a 4.8 magnitude event northwest of Vancouver, and, on Feb. 25, a 5.3 magnitude quake 185 km off the B.C. coast.
But whether those events serve as a wake-up call for Canadians to add earthquake coverage to personal home or commercial property insurance policies is anyone’s guess.
“If you live in [the region], you really can’t avoid knowing that you have earthquake exposure,” says Graham Haigh, a senior vice president and special insurance advisor at Wawanesa Mutual Insurance Company.
Haigh describes B.C.’s earthquake loss risk as a matter of “when, not if.” He notes the last major quake occurred just over 300 years ago and that southwestern B.C. experiences just over 1,000 earthquakes every year.
What makes the Feb. 21 quake notable is that people felt it — but Haigh says the reason for that isn’t tied to the event’s Richter-scale measurement.
“It was the depth. So [the Feb. 21 event] was at a one-kilometre depth, which means it’s closer to the surface,” Haigh tells CU. “It’s easier felt. There was another five-point earthquake, north of Vancouver Island that was at a depth of 10 kilometres that nobody felt. These are happening continuously in southwestern British Columbia.”
Claims adjusting firms tell Canadian Underwriter they have not received any claims related to the Feb. 21 event.
For homeowners in southwestern B.C., Haigh notes, only 60% buy quake insurance. “So we have a 40-point protection gap and even those that do buy coverage have fairly healthy deductibles.”
Related: What brokers are suggesting to lower quake deductibles
Overall, he adds, earthquake coverage is expensive. “One half of a homeowner’s premium is tied to earthquake coverage…if you’re in any of the higher risk zones in southwestern British Columbia.”
While that region’s coverage gap is wide, Haigh says it still outstrips coverage levels immediately south of the border. For example, in Seattle, only about 15% of homeowners buy earthquake coverage.
Elevated deductibles in B.C. earthquake insurance coverage were a key topic at the June 2024 Insurance Brokers Association of B.C.’s AGM and Leader’s Conference. Discussions about ways brokers could bring the deductibles down for consumers included a suggestion that the cost of a home’s contents could be stripped out of the quake product.
“The vision I have is we need to not pay for cosmetic damage to property,” IBABC executive director Chuck Byrne proposed at a panel discussion concluding the conference.
“Perhaps we only insure the big-ticket product against the habitational aspect of getting back into the home and we don’t pay for the small stuff. And that means the [amount] of the deductible is going to change. You don’t have the big deductible. You have [quake] coverage that only applies if [the home is] inhabitable.
“If it’s uninhabitable, that’s when the real product kicks in.”
Resiliency options
Insurers continue seeking ways for communities to build resiliency against long-term risks.
Haigh notes B.C. building codes have been updated several times over the past 50 years, including a March 2024 update that contains seismic upgrades. From an insurance perspective, older structures, both residential and commercial, may require owners to pay higher deductibles, depending on which codes were applied when they were built.
“[There are] a lot of older homes and properties in southwestern British Columbia, and there is an exposure to conflagration fire because you have all the natural gas lines that are around [that area]. If you have an earthquake and they rupture, then fire [usually] comes with that,” Haigh says.
What’s more, B.C.’s building codes are designed to prevent injury, as opposed to reducing insured losses.
“Their goal is to protect life…so those buildings will likely still be full write-offs. From an insurance perspective, we’re going to pay the same. The codes are driven…to allow people to escape uninjured, or less injured,” he adds.
To that end, he notes insurer quake recommendations focus largely on preparedness — having a safety kit that includes first aid materials, water, flashlights, matches and food so that insureds can take care of themselves immediately after an earthquake.
Feature image by iStock/bymuratdeniz
