South Napa Earthquake’s Insured Losses Could Reach $1b – EQECAT

(The 6.0 earthquake caused damage to historical buildings in the city of Napa, Calif. Photo of damage to the city’s Post Office by Matthew Keys.)

Insurance losses could range from $500 million to $1 billion, according to a report on the incident by CoreLogic EQECAT. The 6.0 magnitude quake, which occurred at 3:20 a.m. local time on the morning of Sunday, Aug. 24 near Napa, California, was the largest since the 1989 M6.9 Loma Prieta Earthquake. The event caused structural damage to buildings around the San Francisco Bay area and caused 89 casualties, 3 or which were in critical condition according to EQECAT’s initial report.

USGS ShakeMap of Aug. 24 South Napa Earthquake.

USGS ShakeMap of Aug. 24 South Napa Earthquake.

The earthquake was located six miles southwest of Napa at a depth of 6 miles on what EQECAT says is a yet-to-be-identified northwest oriented strike-slip fault. A state of emergency was declared in the city of Napa. The quake was felt across the Greater San Francisco Bay Region – California’s second most populous urban area – with nearly 8 million people experiencing at least light-to-moderate shaking. EQECAT’s report says that 153,000 people were subjected to strong shaking, 86,000 felt very strong shaking and 60,000 were subjected to the greatest level of severe shaking in the epicentral area near Napa.

Structural and Business Interruption Losses

Reports of structural damage were widespread, with the greatest damage occurring to historical buildings, according to EQECAT. “Several buildings in the downtown core of Napa have sustained bricks falling off buildings and some partially collapsed or leaning walls,” EQECAT reports. “Structural engineers are assessing the level of damage [but] at this time, it is not known how much of the structural damage is major and how much is cosmetic.”

The quake may cause business interruption losses, as it truck a very popular tourist area and many businesses – including wineries and restaurants – sustained both structural and structural damage. Among the latter were wine losses, a number of which have been reported, according to EQECAT.

The quake caused a fire at a mobile home park, damaging six mobile homes, four of which were completely destroyed. Lack of wind at the time of the quake minimized fire losses, but broken water mains contributed to fire damage by limiting the flow water to fight the fires.

Insurer Text-Messages Claimants

Fireman’s Fund Insurance Company (FFIC), located in Novato, Calif., about 20 miles west of the epicenter, deployed catastrophe experts to assist affected policyholders and conduct inspections of damaged homes, businesses and other property, according to a company statement. The property insurer is receiving claims and providing policyholders in the affected areas with updates and alerts via text messaging.

EQECAT cautions that loss estimates are preliminary and that there is “a fair amount of uncertainty” associated with possible losses, given the unknown extent of business interruption and content losses. The firm says that residential losses are approximately one half to one quarter of the loss estimate. “If the loss exceeds $1 billion, it will be from uncertainty in commercial losses,” EQECAT stresses. “It is anticipated that losses to the wine industry could increase this estimate.”

The Napa Valley wine harvest had already begun by the time of the quake, EQECAT’s report notes. “Had this event occurred pre-harvest, these losses would have been less,” the report says.

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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