P&C the September 2023 issue

Earthquake Risk Mitigation Checklist

Kate Stillwell, president of Parametric Insurance, offers a list of risk mitigation and transfer solutions.
By Gordon Feller Posted on August 30, 2023

1. Conduct a planning exercise for an earthquake scenario. This is a tabletop “rehearsal” of a simulated but plausible earthquake. Include other key executives, particularly from HR, logistics, IT and facilities management to discover operational interdependencies and identify actionable mitigation. Outcomes of the planning exercise will likely be useful for many different types of crises, not just earthquakes.

2. Address risk for remote workers. The most common injuries in an earthquake are from falling objects. When your employees are remote, mitigation might be outside your direct control. Encourage employees to reduce hazards in their work-from-home setup. Consider adding gamification to increase participation. Use “before” and “after” photos and introduce friendly competition.

3. Focus on facilities. Hire a structural engineer to conduct an earthquake assessment. If you’re renting office space, ask the owner for the earthquake assessment of your buildings. Ask for not only safety information but also information on time to re-occupy. Use it as a basis to estimate the operational cost of downtime and delays. The most common earthquake damage is breakage of non-structural elements, including sprinkler pipes, HVAC equipment and ductwork, and walls and partitions. Consider resulting losses, such as flooding, if these elements are damaged.

As a rule of thumb, indirect losses from earthquakes are typically one to two times the costs of physical damage.

Certain structural types are known safety hazards and require retrofits, including masonry brick buildings; mid-rise reinforced concrete buildings, especially those built prior to 1980; low-rise “tilt-up” concrete wall buildings with timber or metal roof framing, especially if built prior to 1995; and so-called “soft-story” buildings, typically four stories or fewer, characterized by at least one “open” story with storefronts, open spaces, large windows or garage openings and few interior walls.

Certain structural types are known to experience long downtimes, including steel-framed, mid-rise buildings built between 1980 and 1995 and high-rise buildings built after 2005.

4. Set up options and retainers. To minimize downtime, arrange resources in advance and consider paying a retainer to be first in line for services, including evaluation, repairs, rental of alternate facilities, and critical operations.

Stillwell’s List of Insurance Solutions

1. Workers compensation. Review your workers compensation insurance to ensure it does not exclude earthquakes and it does cover remote work.

2. Indemnity earthquake. If you buy indemnity earthquake coverage for your physical facilities, make sure the limits are up to date considering recent inflation in rebuilding costs. Coverage should include losses due to non-structural damage, sprinkler leakage and data loss. Fire following earthquake
should be covered by either your commercial property or your earthquake policy.

3. Organization-level parametric insurance. Consider covering the cost of operational downtime or other unforeseen expenses through parametric coverage.

4. Employee parametric coverage. Consider offering or subsidizing multiperil parametric insurance as an employee benefit to help your workforce pay for the unanticipated expenses of disruption and come back to work sooner. Parametric insurer Jumpstart offers individual-level parametric coverage with full automation and API integrations.

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