Study finds B.C. earthquake could jeopardize national economy, recommends back-stop plan
Japan and New Zealand have both been hit by terrible earthquakes in the past week. With such tragic disasters at the forefront of international news, the Conference Board of Canada picked a timely moment to release a new study that explores the potential economic impact that would occur if a large earthquake were to strike British Columbia.
The findings? Bleak, to say the least.
The major takeaway from “Canada’s Earthquake Risk: Macroeconomic Impacts and Systemic Financial Risk” is that Canada is currently unprepared for the fiscal and macroeconomic consequences that an earthquake of such substantial magnitude would cause. It would result in “the possibility of widespread failure in the insurance industry.”
There are a number of factors that would serve as catalysts for allowing this type of an event to grossly supersede regional boundaries. The Insurance Board of Canada, which provided funding for this research, notes that economic growth would be halved, resulting in a $100 billion cumulative GDP loss and the elimination of tens of thousands of jobs. Canadian Underwriter highlights the fact that of the expected $127.5 billion in total costs, only $42 billion would be insured. And even then, insurers would be unprepared to meet that full amount. They are thought to be prepared for a disaster where the damages would total somewhere between $15-$20 billion, but would begin to significantly falter in the $25-$30 billion range.
A back-stop emergency plan could soften the economic devastation in a large earthquake scenario and prevent ad hoc measures from needing to be taken.
Given that Canada hasn’t experienced a devastating earthquake since 1700, it’s fair to wonder if preparing for one is a sign of unnecessary caution. However, Natural Resources Canada has predicted that there is a 30% chance of a significant quake hitting Western Canada within 50 years. That’s a hard number to ignore.