The New Madrid Seimic Zone Report, Part 1

The National Association of Insurance Commissioners has created an interesting report published November 1st of 2022. The report is titled Addressing the New Madrid Seismic Zone Earthquake Protection Gap. For obvious reasons this paper is of keen interest to QuakeCov. And for that reason we shall make this rerport subject of several blog articles about it.

QuakeCov endevours to provide independent earthquake insurance to consumers on the West Coast. Although the New Madrid Seismic Zone is NOT on the West Coast, it is of particular interest to this website and independent agencies.

The Authors of the Paper are listed as: Lisa Groshong, Ph.D.,Jeffrey Czajkowski, Ph.D.,Lori Croy, and J. Brian Houston, Ph.D.. Doubtless others played a role of the writing of it as well. The paper was written in 2022. The paper contains an Executive Summary – which is the simplest way of reviewing the entire project. Our discussion of the report is certainly no replacement for reading it in its entirety.

The central reacurring theme of the report is focused on the lack of earthquake insurance in this specific geographical area and potentially what can be done to raise that purchase rate.

However, before we discuss in depth this paper, let us review some basics about the Earthquake risk, Earthquake Insurance, and the location in general.

Earthquakes are not Covered in the US on Homeowners Policy:

This website has stated on hundreds of occassions that your typical, unendorsed homeowners policy does not cover Earth Movement. Earth Movement and Land Movement would seem to be the exact same thing. It does not matter if that movement was subsidence, or a landslide, or an earthquake = none of it is covered by a homeowners policy.

Home Insurance does not cover earthquakes.

How to Procure Earthquake Insurance:

Most consumers, in California as an example, can purchase Earthquake Insurance via the CEA mini policy alongside their homeowner policy or purchase an Standalone Independent earthquake policy. Two main Options. That earthquake policy typically only covers the land movement of earthquake and not typically land slides, and other earth movements. Other exclusions and limitations apply.

Different options exist in different states.

The New Madrid Seismic Zone:

The New Madrid Seismic Zone is located generally in the Tennesse, Kentucky, Missouri, and Arkansas border area. It is located just south of the Wabash Valley Seismic Zone. This major fault zone was responsible for the 1811-1812 New Madrid Earthquakes which was one of the largest quakes felt in somewhat modern times. Not all seismic zones are located on the west coast of the US. That surprises many americans

The New Madrid Seismic Zone can be abbreviated as the NMSZ.

The National Association of Insurance Commissioners:

The National Association of Insurance Commissioners or NAIC for short, is a ” U.S. standard-setting organization” that is “governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories to coordinate regulation of multistate insurers.” The exact name more or less explains it. Since insurance is regulated at the state level it can often be most useful to have a group of insurance wonks from various state agencies get together and talk about insurance risk. NAIC Source.

The New Madrid zone does not limit damage to just the state of Missouri. Hence the need for the regulators to…share notes and discuss stuff.

The New Madrid Seimic Zone Report, the Central Question:

Within the Executive Summary a Key Question is Asked: “What is driving the earthquake insurance coverage protection gap” in the New Madrid Seismic Zone? This very question would seem to be one of the most important question posed. Although the report is not titled as such – its seems almost a better title for a gaggle of Commissioners to gather about.

“What is driving the earthquake insurance coverage protection gap” in the NMSZ?

The Executive Report for the New Madrid Seimic Zone Report

The report notes that just 24% of residential dwellings have earthquake coverage in Missouri. They note that “in 91 of Missouri’s 115 counties, only 20% or lessof residences have earthquake insurance coverage.”

The excutive report section notes three main reasons for uptake in earthquake insurance being: 1. Using an Insurance Agent to “help make decisions” 2. “talking to friends and family about earthquakes” and oddly 3. consumer confidence in having enough information about earthquakes.

They note that with these simple [somewhat] suggestions that “there is potential for improvement…to close the earthquake insurance coverage gap.” That is a bright spot in this report.

The Purpose of the the New Madrid Seimic Zone Report:

From my first read of the report, the same question was one that I kept seeing “What is driving the earthquake insurance coverage protection gap” in the NMSZ?” Over and Over. However the report details that the purpose was slightly different. Certainly broader. “The purpose of this campaign was to promote earthquake preparedness among individuals in Missouri counties in the NMSZ.”

They noted in past campaigns “”that renters and homeowners insurance do not cover earthquakes. They “had found that seeing the 2021 campaign was not related to participants knowing that renters and homeowners insurance do not cover earthquakes.”

New Madrid Seimic Zone Risk:

The true start of the report sets the stage: “In the middle of the U.S., near the confluence of the Ohio River and Mississippi River in southern Illinois, lies a significant area of earthquake risk named the
New Madrid Seismic Zone (NMSZ)” And “this earthquake risk may not beas well-known as earthquake risks along the U.S. West Coast, it is an area of serious earthquake hazard…”

An estimated “7.0–7.5 [earthquake] on the Modified Mercalli Intensity (MMI) scale” hit the region in 1811/1812. “Since 1974, the NMSZ monitoring network has recorded more 4000 earthquake….” and the biggest was a 5.4 shaker in 1968. It would seem that the NMSZ is indeed a risky area. Quakes happen on the West Coast, that much everyone knows – but the middle of the Country? Yes indeed.

Damage and Costs from a NMSZ Incident Projected:

“Scientific estimates provide the probability of an earthquake of magnitude 6.0 or greater occurring in the next 50 years in the NMSZ to be from 25% to 40%…” Up to a 40% chance of a serious earthquake hitting this region. Astonishly the report notes that Lloyds of London has run property damage models on the area. Their model resulted in “an estimated USD44bn Industry Property Loss (shake and fire following)…” from an earthquake in the area.

Onto NMSZ Part 2:

That is the End of the New Madrid Seimic Zone Report, Part 1. Check back Later for New Madrid Seimic Zone Report, Part 2.

Both https://content.naic.org/sites/default/files/documents/cipr-report-earthquake-protection-gap.pdf

and https://plmr.com/4-key-takeaways-from-the-latest-earthquake-insurance-report/