Insurance Experts Call for Steps to Reduce Future Quake Damage

California must begin making its day-care centers, schools, hospitals, police stations and homes more quake-proof and must discourage new building in quake-prone areas, seismic safety officials have been told.

With the state’s population increasing to an estimated 64 million by 2040, and inhabited areas expanding, potential damage could bankrupt insurance systems, insurance industry experts said.

They also questioned the reliability of estimates that have been made by so-called quake modeling firms as to damage in future quakes, and warned that adequate premiums may be virtually impossible to calculate.

The principal industry speakers at last week’s three-day conference sponsored by the Federal Emergency Management Agency were Harvey Ryland, president of the Insurance Institute for Property Loss Reduction; its president emeritus, Eugene L. Lecomte, and Farmers insurance group actuary Jonathan Adkisson.

They warned that losses in huge earthquakes, as well as mammoth hurricanes on the East and Gulf coasts, could easily overwhelm the combined resources of about $200 billion of property-casualty insurers, exhausting even funds set aside for auto accidents.

The seismic safety meeting at the Bonaventure Hotel was attended by members of seismic advisory boards from across the United States and some Pacific islands. Steps to reduce quake losses, or mitigation, was a major topic.

Despite the advent of the state residential quake insurance agency, the California Earthquake Authority, private insurers remain exposed to commercial damage, and to damage from fires after quakes in all insured structures, the experts noted.

Ryland told of meeting with five focus groups of homeowners last week in Los Angeles. He said he found that many Californians feel a profound aversion to even the term “mitigation.”

The focus groups told him that they certainly would not act on retrofitting without financial incentives. Homeowners did say that they might be more inclined to act if the need were emphasized at schools and their children pressed for it at home. Even then, they said, they would have to be reminded frequently.

Ryland said his group, sponsored by the insurance industry, is planning to start pilot disaster mitigation projects in five communities nationwide, including one possibly in Irvine, to demonstrate what potentially might be done on a wider scale.

The first quake retrofit priority should be day-care centers, he said. Next should be schools, hospitals, nursing homes and police stations, with private structures coming after.

A comprehensive plan may take 30 to 50 years to fully implement, Ryland said.

Lecomte suggested that Californians who live in risky areas have to be prepared to bear many of their own losses when a devastating quake occurs. “Don’t we have a responsibility to bear some of the burden if we choose to live on a fault line?” he asked.

He added: “A catastrophic earthquake in my judgment is uninsurable,” especially because its risk cannot be accurately assessed in the present state of scientific knowledge, and no precise loss is known in advance on which to calculate adequate premiums.

Adkisson of Farmers said he might not go quite that far.

But, he said, the industry “is faced with a great challenge, since it is difficult to even predict the frequency of quakes,” much less their severity.

Farmers, he said, was greatly surprised by the magnitude of damage in the 1994 Northridge quake. The insurance company had paid damages of $15 million in the 1987 Whittier Narrows quake and $140 million in the 1989 Loma Prieta quake. “As far as we knew, that would be the neighborhood of the claims we were likely to face,” he said. “Then we had to pay out $2 billion in the Northridge quake.”

If an even bigger loss were to occur, “we’re not at a loss, we’re out of business,” he said. “And we’ve figured out these big losses are a little more likely than we thought.”

So, he said he prefers to see mandatory mitigation measures taken to avert the worst in the future.

Lecomte said land-use controls are among the most crucial elements of any mitigation plan, and he indicated that there might be building limits on steel-frame buildings, until earthquake engineers find out how to prevent steel-frame damage.

But Los Angeles City Councilman Hal Bernson, a leading mitigation advocate, later cautioned that many proposed mandatory measures have come up against insurmountable political obstacles.

In the immediate aftermath of the Northridge quake, Los Angeles passed a few mandatory measures, but others had to be made voluntary, he said.