Canada’s ‘quake zone - a disaster waiting to happen?

Vancouver, Montreal, or Ottawa: one of these Canadian cities will some day experience a major earthquake that has the potential to cause loss of life, property damage and economic disruption on an unprecedented scale, according to a new report from the Institute for Catastrophic Loss Reduction (ICLR), sponsored by Lloyd’s.

The local and provincial emergency services in Canada have a good record of responding successfully to natural hazards, the report says. But those services have not yet been tested by a large urban earthquake.

With the appropriate investments in public safety, however, future earthquakes can be prevented from becoming disasters, the report says.

The potential for an earthquake is real. There is considerable seismic activity in Canada and more than 4,000 earthquakes are recorded each year. Most are small and can only be felt by sensitive monitors, but occasionally some are very powerful. Moreover, the two regions in Canada where there is a high or moderate risk that a major earthquake may strike a large urban centre are home to almost 40 per cent of the people and businesses in the country.

East or west - where is next?

There’s a high risk that a major earthquake will strike southwestern British Columbia, the large and rapidly growing region in the west of Canada that includes Vancouver and Victoria. Such seismic risks in this part of North America are similar to those in Chile, including the risk of a “megathrust subduction” ‘quake like the one that caused such destruction in the Latin American country earlier this year.

Another, albeit lesser, risk exists for a major earthquake striking southern Quebec or eastern Ontario. This region includes the economic centres of Montreal, Ottawa and Quebec City. In fact, in June this year a magnitude 5.0 (moderate) tremblor shook the region 60 kilometres north of Ottawa, near the Ontario border, and was felt across southern and eastern Ontario and western Quebec.

Up to date economic impact forecasts for a more powerful event are hard to come by, but a study commissioned by Munich Re Canada in 1992 estimated that a 6.5 magnitude earthquake located near Vancouver could cause more than 200 fatalities, 7,000 injuries, and economic losses of between C$14 billion to C$32 billion. Insured claims were estimated at between C$7 billion and C$13 billion.

Rapid growth in the region over the past twenty years means that a current estimate of losses would be much higher.

The authors of the Munich Re study published a further paper in 1994 estimating that the damage to buildings and infrastructure in the lower mainland of British Columbia from a megathrust subduction earthquake would be C$51 billion to C$97 billion.

Quake cover included in commercial policies

The majority of businesses in Canada purchase all-hazard insurance coverage that includes earthquake damage. That means that the insurance industry will be the primary source of funds to support economic recovery in Canada following a major earthquake.

Insurance will pay for the repair or replacement of damaged structures, fire damage, and repair or replacement of damaged equipment. Payment of business interruption claims is likely to be one of the largest costs for insurance companies.

Many homeowners and small businesses, on the other hand, are not covered by their insurance. Around 40% are not protected in British Columbia; elsewhere in Canada 98% of homeowners are “off-cover”, according to the ICLR report.

Rude awakening for Ottawa

Most attention has been focused on the risk of an earthquake in the greater Vancouver area, says Deborah Moor, president of Lloyd’s Canada, and that’s why fewer people have purchased insurance to cover earthquake damage in Eastern Canada. 

“The risk and possible damage from an earthquake in Eastern Canada is less well-known and so it’s probably fair to say that businesses and homeowners are in general less prepared,” she told lloyds.com. “I think that the significant earthquake near Ottawa this summer was a wake up call to many of us.”

Moor warns that the country’s infrastructure could be challenged by a powerful earthquake. “Again, the concern is that in Eastern Canada structures have not been built to withstand powerful earthquakes. Both Ottawa and Montreal have large populations and significant property values that are therefore potentially exposed,” she says. “And given the West Coast’s exposure and unique geology, there is always more that can be done there.”

Moor says Lloyd’s Canada will continue to help the different levels of government work together and will contribute to seismic risk research, through the ICLR, to ensure that all Canadians are well-prepared and well-protected.

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