Over the past five years, one of the countries to lead headline news with earthquake events has been New Zealand. Most recently, on November 14, 2016 (local time in New Zealand, November 13, GMT) a large megathrust earthquake struck off the east coast of the South Island along the southern end of the Hikurangi subduction zone, just north of the city of Christchurch. According to New Zealand’s GeoNet, and the U.S. Geological Survey, the earthquake was estimated at magnitude 7.8. The event was widely felt across much of the country impacting the cities of Christchurch, Wellington and many smaller communities on the northern end of the South Island, as well as the southern end of the North Island.(1)
Damage and fatalities have been reported, as have landslides which are hampering recovery. It is anticipated that this large event will likely have a severe economic impact. As with most large-magnitude earthquakes, the event was followed by a number of aftershocks as large as magnitude 6.5.(2) Colleagues in our CoreLogic Wellington office commented that the shaking was one of the worst experienced. Given the size of this earthquake, hundreds of smaller magnitude aftershocks are expected, however, they will be felt and the larger magnitude aftershock events could have the potential to cause even more damage.
New Zealand is located along an active tectonic boundary, and as a result is a highly seismically active region prone to many earthquakes. It is located on a complex tectonic setting with the Australia and Pacific plates subducting (or descending) beneath one another in two subduction zones:
- The Hikurangi subduction zone along the east coast of the North Island and northern end of the South Island
- The Puysegur subduction zone along the southwest coast of the South Island
In addition to the many small crustal faults located in New Zealand, the Alpine fault is the main fault spanning the 900-kilometer (560 mile) length of the South Island.(3) Because of this active tectonic setting, earthquakes of various depths are possible. Shallow crustal earthquakes with depths less than 40 kilometers occur primarily along the crustal faults across the nation; intermediate-to-deep earthquakes occur within the subducting plates of the subduction zones; and very large megathrust events along the subduction interface. Historical earthquake activity and paleoseismicity (the study of geologic sediments and rocks to identify earthquake occurrence) indicate that many of the faults in New Zealand are capable of generating very large earthquakes, some with magnitudes greater than 8.0.
New Zealand has a long history of large, damaging earthquakes that have shaped the local insurance market and risk management strategies. The 2010-2011 destructive sequence of earthquakes in the Canterbury Region, beginning with the magnitude 7.1 Darfield earthquake in September 2010 which ruptured a previously unidentified fault known as the Greendale fault approximately 30 kilometers (18 miles) west of the city of Christchurch.(4) While this was the largest event in the sequence, it was not the most damaging due to its location on the Canterbury Plains.
Five and a half months after the Darfield event, the devastating magnitude 6.3 Christchurch earthquake occurred 6 kilometers to the southeast of the Christchurch central business district.(5) The earthquake killed 185 people and damaged or destroyed more than 100,000 buildings with the greatest damaging the unreinforced masonry, historic buildings.(7) This earthquake is also known to be New Zealand’s costliest disaster with $15 billion in economic losses and $12 billion in insured losses.(6)
Several other earthquakes occurred in this sequence of events, with the February 2011 event remaining the most destructive of the sequence. The long-term recovery of this earthquake continues with studies from the Christchurch City Council indicating that it could take up to 20 years for the city to fully rebuild following the disaster.(7)
Following the 1942 Wairarapa earthquake (8), New Zealand established the Earthquake Commission (EQC), a unique government-owned Crown entity. The EQC manages the nation’s natural disaster fund, offers resources to educate citizens about disaster preparedness, actively researches to improve the detection of natural hazards, and manages the settlement of insurance claims from natural disasters. Following an event, the EQC pays the first $100,000 in residential damage caused by natural disasters, including earthquakes, landslides, tsunami events, volcanic eruptions and geothermal activity. The EQC is a unique entity as it is the only one in the world that offers coverage for residential property, contents and damage to land.(9)
From an insurance perspective, the 2010-2011 Canterbury sequence shifted the insurance market to move from guaranteed replacement cost cover to nominated sum insured cover. Nominated sum insured is a policy that will cover the cost to rebuild, repair or replace a damaged home to the replacement value to the limit set by the insured, so it is the homeowners’ responsibility to nominate a sum insured that is a sufficient replacement cost value.(10) This fundamental change in business practices ensures adequate coverage at time of a loss.
Significant events such as the Christchurch earthquake highlight the need for more sophisticated risk management strategies. As one of the higher seismicity regions globally, the earthquake risk in New Zealand continues to be of great concern. Recent and historical events are a stark reminder for all to be prepared for the devastation that can occur and how a major event has the ability to change the industry. The EQC website offers information of the hazard, how to prepare, insurance offered, and how to file claims for earthquake damage. The Geological and Nuclear Sciences (GNS) organization also offers a scientific view of the earthquake hazard and historical events across the country.
3. Barth, N. C. (2013). A Tectono-Geomorphic Study of the Alpine Fault, New Zealand (Thesis, Doctor of Philosophy). University of Otago. Retrieved from http://hdl.handle.net/10523/3847
4. Stramondo, S., C. Kyriakopoulos, C. Bignami, M. Chini, D. Melini, M Moro, M. Picchiani, M. Saroli, and E. Boschi (2011). Did the September 2010 (Darfieled) earthquake trigger the February 2011 (Christchurch) event?, Scientific Reports, Vol. 1, No. 98, DOI:10.38/srep00098, 7 pp.
5. Kalkan, E. (2011). Preface to the focussed issue on the 22 February 2011 magnitude 6.2 Christchurch earthquake, Seismological Research Letters, Vol. 82, pp. 765–766.
6. King, A., D. Middleton, C. Brown, D. Johnston, and S. Johal (2014). Insurance: Its role in recovery from the 2010–2011 Canterbury earthquake sequence, Earthquake Spectra, Vol. 30, pp. 475-491.
11. Update from New Zealand's GeoNet (11/16/16)
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