Earthquake insurance

Finance, Taxes, Banking, Insurance and Retirement
1
I learned that Basel has a relatively high risk of earthquakes. Do you insure against this risk? How much do you pay (premium as percentage of house value)? I was wondering if parametric insurance exists as a maybe simpler way to deal with this or whether this is not really available for households.

2
Available for buildings. I was quoted 200chf more on the policy. Note that earthquakes are not included as standard you have to ask.

3

Earth science, it’s fun

First, there’s a significant difference between hazard and risk. Hazard is the natural phenomenon, while risk is being there where the natural phenomenon can hurt you. So, I guess you wrote about earthquake hazard. This is the first result in google of hazards vs risk: https://www.eufic.org/en/understandi…sk-infographic

Then, what’s the hazard level? Nerds at ETHZ work on that.

http://www.seismo.ethz.ch/en/knowled…d/maps/hazard/
http://www.seismo.ethz.ch/en/knowled…y-switzerland/

Earthquakes happen several km below surface and they have to travel across rocks and soil before reaching your house. Different subsoil material reacts differently to earthquakes. Without going into too much detail, soils in river valleys are the worst because the waves of an earthquake are amplified, while thinner soils on hard rock are best. http://www.seismo.ethz.ch/en/knowled…/maps/effects/

The building itself also matters. First federal building regulation in Switzerland that considers earthquakes for design is from 1970, with updates in 1990 and 2003. Some cantons have their own building regulations. http://www.seismo.ethz.ch/en/earthqu…-construction/

I’d say hazard is not that high in Basel. Risk is lower if house is not build in a river valley and a relatively recent construction that considered earthquakes in its design. If for whatever reason you still consider the earthquake hazard is important, buying insurance changes nothing. Better move to a place with lower hazard.

4
Very interesting post, Axa, tks !

5
I have earthquake insurance on top of normal building insurance. Having insurance means that in the event of an earthquake causing damage to the house, the insurer will pay for repairs / rebuilding.

~200 a year, depends of course on the rebuilding cost.

6
In the canton of Vaud it's covered by the ECA, the obligatory cantonal insurance against natural disasters. There are a few other cantons with similar institutions.

(I think in German it's the Kantonale Gebäudeversicherung).

7
Hi, I hate to do this as it sounds picky but its an important correction. In Vaud, earthquakes are NOT covered by ECA. Its in their docs (attached) that it is specifically excluded.

Vaudoise charge around 200CHF extra for it.

8

Earthquake damage to building are not covered by the mandatory part of ECA Vaud: https://www.eca-vaud.ch/particuliers…re-des-dangers

9

But in same respect, Earthquake risk is fairly low in Vaud compared to say Valais or Basel, not an in existent risk but very very teeny weeny small.

10

Mark and Dario discuss earthquakes on this week’s Swiss-UP

https://www.worldradio.ch/listen-aga…re/?autoplay=1

11
There was a fairly big earthquake in Vaud back in 2005 or so. Not long after/before the massive hailstorm. Not that the two events were connected.

12
We got hit by the hail in 2013, but didn't feel the earth move.

13

Aren't the earthquakes more centralised in Valais (Sion/Sierre) and we merely feel them in Vaud ?

14
Yes. But is was 5.3-4 as I recall. Easily felt. Minor damage.

What's so dumb is that the Basel geothermal project was shut down over <4 earthquakes that people claimed had damaged their property.

15
Listen to the link I posted above.

16

Very interesting part on proposal to modify the law about earthquake insurance. The idea that every property owner must pay 0.7% of their property value into a repair and rebuild fund after a catastrophe…it’s almost socialism I guess the issue is that Switzerland is relatively small and a large earthquake will damage a significant number of buildings making traditional insurance schemas to fail. Insurance works because a large of pool of payers cover the compensation of only a few ones. This is optimal for accidents, fires, illness and the like. But earthquakes are the opposite, they damage a whole region.

However, it’s quite interesting that in the home of reinsurance companies no one thinks that the Swiss Confederation could emit an earthquake/catastrophe bond with a parametric trigger. Reinsurers organize this regularly. For example this is the gossip around Turkey and reinsurers, do not click if disgusted by capitalism https://www.artemis.bm/?s=turkey

Anyway, the existence of buildings from the 1800s, 1700s and even 1600s demonstrates that Earth is more or less peaceful around here.

17

The earthquake risk in Switzerland is fairly concentrated, basically to the Rhone (Valais) and Rhine valleys (the “Rheingraben”, a fault line Basel northwards, another one from Chur north to the Bodensee).

Visp in 1855 (magn. 6.2) and Sierre in 1964 (magn. 5.8) (both Valais) were the most recent large ones in Switzerland. Sierre 1964 today would result in some 8-figure damage, says the federal SED , that could be handled with relative ease.

Not sure if it makes sense for everybody to finance concentrated risks, though if something like the 1356 Basel earthquake (magnitude 6.6) with its 50-100 bln expected damage (presumably bases on prices from a decade ago) were to happen again it’s clear that the unaffected areas would have to help.

Yes, cat bonds look like a sensible and feasible approach (at least for the first billions). Let those willing to assume risk take it, have it predominantly financed by those most at risk. That’s how insurances work.

18
The great Basel earthquake was nearly 700 years ago. They're expected every 500 years or so...

19
i believe that one flattened basel. however, there are hundreds of earthquakes which happen every year in switzerland but thankfully most are not too serious to be strongly felt.

there was a 4.7 scale one just 15km from basel last year.

20
I know. I was in the cool down room at the Migros Fitness sauna complex when it happened. Our Ukrainian guests were terrified - we forgot to warn them that we live in an earthquake zone.