You’ve heard and read about it for quite a while. Those who grew up in the 1950s — or earlier or even a bit later — have been hearing about California’s “big one” for decades. It’s that mind-boggling, great earthquake that could — if it’s strong enough — radically change things in the Golden State forever.
Risk Management Solutions (RMS) recently made a prediction about the “big one.” The prognostication says San Francisco will likely be hit by a 6.7 magnitude earthquake in the coming decades. The firm was very specific on the size of the quake but not so precise with the date.
Large quakes are common to the area. In 1838, 1868 and 1906 earthquakes of 6.7 magnitude or higher have been recorded. The USGS thinks there is a 63% shot at the area having another one that size in the next 30-years.
RMS said when it finally happens, damages will be in the billions of dollars and much of that will not be covered by insurance. It pointed out the damages from the 1989 Loma Prieta Bay Area earthquake was $6 billion and only $960 million of that was insured.
Then RMS got more specific. A 7.9 shake would cause losses exceeding $200 billion at today’s dollars. It would be catastrophic to area residents. Patricia Grossi — who is RMS’ senior director of model product management — said around 10% of the state’s homeowners and businesses have earthquake insurance.
“When an event happens the Bay Area is going to be hindered because we don’t have that funneling of monies to help rebuild quickly. It’s a question of, once the dust settles, how quickly are we going to be able to rebuild?” she said.
The Bay Area today puts $388.3 billion in gross domestic product into the nation’s economy and supports 7.15 million people. An earthquake today — because of increased population, a growing economy, higher property values and more commercial activity — would be significantly more expensive, and detrimental to the economy today than it was 25-years ago.
RMS also points out that state law requires insurers selling homeowners offer it to residents. Those same residents — however and as you know — are not required to purchase.