July 23, 2015

Recent southeast Missouri earthquakes serve as reminder homeowners should consider buying coverage

State insurance regulators' findings indicate coverage crisis in southeast Missouri

Jefferson City, Mo. - Two earthquakes that rattled parts of southeast Missouri last week serve as a reminder that homeowners should consider purchasing earthquake coverage. Most homeowners policies do not offer coverage for earthquakes. Separate earthquake coverage, provided through an endorsement, typically must be purchased.

A report recently released by leading global reinsurer Swiss Re suggests a sequence of New Madrid earthquakes similar to that which struck the U.S. in 1811 and 1812 could cause $300 billion in damage. The reinsurer noted that such an insured loss burden would be equivalent to Hurricane Katrina, Superstorm Sandy and the Tohoku, Japan, and Christchurch, New Zealand, earthquakes all hitting the same area. 

"Once again, Missouri residents are reminded of their vulnerability to earthquakes. Having earthquake insurance is the best way to ensure you and your family can recover after an earthquake," said Missouri Department of Insurance Director John M. Huff. "However, many Missourians are having trouble getting earthquake coverage. Recent insurance data demonstrates that southeast Missouri is experiencing an insurance coverage crisis."

A study by the U.S. Geological Survey estimates the probability of a magnitude 7.5 or greater earthquake in the New Madrid zone over the next 50 years is 7-10 percent. The probability of an earthquake exceeding magnitude 6 over the same period is 25-40 percent. A joint assessment by the Mid-America Earthquake Center of the University of Illinois and the Federal Emergency Management Agency predicts the New Madrid event could constitute the highest total economic loss of any natural disaster in U.S. history.

According to data collected from insurers who offer earthquake coverage in Missouri, on average premiums in the six counties that comprise the New Madrid area increased by more than 500 percent between 2000-2014, and in one county by nearly 700 percent. In 2000, more than 60 percent of homes in the New Madrid area had earthquake coverage. By 2014, the rate of coverage had plummeted to 20 percent. The value of homes without coverage is estimated to be $86.2 billion.

The department is expected to release a comprehensive earthquake report later this year.