You weren't there, unless you have a strong sense of déjà vu and are a devout believer in reincarnation, but on the evening of Oct. 18, 1356, a magnitude 6.5 earthquake destroyed most of the castles and churches in Basel, Switzerland.
Were that same magnitude quake to strike today, the losses could exceed $60 billion, according to a report put out earlier this year by the Oldwick, N.J.-based A.M. Best Co.
The findings are part of an analysis of the earthquake risks in Central Europe, which also points out that the great majority of the commercial and residential construction in Switzerland, Germany and Italy is not built according to standards that incorporate seismic safety considerations.
1356 may seem like a long time ago, but an earthquake that occurred as recently as 1992 in Roermond in the Netherlands set off seismic tremors of a different kind. Researchers have since noted that that earthquake, which caused damages in the range of $40 million to $60 million, was the strongest earthquake in Central Europe since 1756.
And there are enough fault lines in Central Europe that reinsurers and other interested parties, including ratings agency A.M. Best, have since gotten much more motivated to see just how vulnerable major population centers in Central Europe would be to a quake and what the losses could amount to.
Just 50 miles to the northwest of Roermond is the German city of Cologne. Cologne is the fourth largest city in Germany, with a population of around 1 million. Cologne, in addition being an epicenter of good beer-making and the arts, sits right on top of the Erft fault, which is capable of producing an earthquake of magnitude 6.3 every 5,000 years or so.
In the beginning of this decade, two researchers with Munich Reinsurance Co. estimated that, if a magnitude 6.0 quake were to strike Cologne, the losses would exceed $14.5 billion. But ratchet that seismic reading up a few points and the projected losses start to jump dramatically. The researchers found that a magnitude 6.4 quake in Cologne would result in $55 billion in losses. And if a quake the size of Los Angeles' 1994Northridge quake, which measured 6.7 on the Richter scale, were to hit Cologne, the losses would exceed $100 billion.
Italy, Turkey and Greece are the European countries where earthquakes in the past few centuries have caused severe damage and remain more engrained in the public consciousness. But look for Central European countries to pay much more attention to earthquake preparedness. Some countries with earthquake exclusions in standard insurance policies could start covering the peril in expectation of new European solvency guidelines due out in 2012.
March 1, 2008
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