Best Report Warns on Danger of ‘Moderate Quakes’ in Europe

January 8, 2008

In a special report A.M. Best Co. warns that “lurking beneath Central Europe are numerous faults that rarely break the ground surface but that still could lead to large scale catastrophe losses for insurers and reinsurers.”

As a result Best noted that companies who could be affected are in the process of “gauging their exposure to these potential quake events as part of new solvency guidelines set to take effect in 2012” [the date set for the implementation of the EU’s Solvency II regulations – See IJ web site:].

Best’s study provides historical perspectives on European earthquakes and the insurance industry, as well as an examination of the ability of the insurance industry and the public to absorb losses from a “major” or “great” earthquake. It combines assessments from three catastrophe modelers to assess the impact of such earthquakes in Central Europe, Greece and Turkey, based on different scenarios.

“A quake in Central Europe would not have to be as powerful as the 1906 San Francisco earthquake or the 6.7 magnitude Northridge, California quake in 1994 to generate at least $10 billion in total losses,” said Best. “This is due primarily to the growing concentration of property values exposed, the quality of existing building stock and the tendency of the soil in some regions to liquefy.”

Despite the growing risks, Best found that “penetration rates for earthquake insurance remain low. In countries such as Italy and Turkey, less than 30 percent of the total expected losses from earthquakes likely to happen once every 200 years would be insured.”

In addition “as awareness of the peril has grown among the European population, some countries that previously had excluded earthquake from standard insurance policies now include it. Others are considering doing so.

BestWeek subscribers can download a PDF copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from our Web site at

Nonsubscribers can download a PDF copy of the full special report (24 pages) for $85 or a combination of the PDF copy plus the spreadsheet file of the report data for $220 from the web site, or call customer service for more information, (908) 439-2200, ext. 5742.

Source: A.M. Best –

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