Earthquake Market Turns Unstable

The earthquake market has moved onto unstable ground as insurers and alternative capital investors demand higher returns on their capital. Rate increases have ramped up over the last year, and buyers should expect higher prices this year for the same coverage. Higher deductibles can be an effective strategy to manage premiums. Buyers who can provide better and more detailed information on their risks can expect a better reception from underwriters. Early and active marketing and working with a broker that offers broad access to markets are crucial for obtaining the most cost-efficient coverage.


California has been relatively quiet seismologically for more than two decades. The last catastrophic quake to hit the state was Northridge in January 1994. That long lull had helped to drive prices lower and lower for roughly a decade, but that trend came to a halt last year. Still, a major quake last summer in the desert north of Los Angeles that was felt by around 30 million people across southern California highlighted the risk for the insurance industry. It’s not a matter of if, but when the next big earthquake strikes.

Investors and insurers that had been willing to supply the market with plentiful capacity in previous years have been taking a harder line, limiting capacity and seeking a higher return for the capital they are allocating to the market. The reduced capacity stems from moves at Lloyds to improve profitability and to shut down unprofitable syndicates. Tighter capacity also stems from diminished appetite among reinsurers and alternative capital investors.

Not the Big One California has not been spared big earthquakes since Northridge in 1994, but the state has been fortunate in that they have occurred well away from major cities. July 2019 - The two Ridgecrest earthquakes, a magnitude 6.4 on July 4 followed by a 7.1 on July 5, caused more than $5 billion in estimated damages at the Naval Air Weapons Station China Lake about 120 miles north of Los Angeles. Other damage was limited due the remote location.1 August 2014 – The 6.0 magnitude South Napa earthquake caused total damages of more than $440 million and insured losses of about $159 million.2 3 January 2010 – A 6.5 earthquake centered about 25 miles offshore damaged hundreds of structures in Eureka in northern California and total damages estimated around $28 million.4 December 2003 – A 6.6 magnitude earthquake that struck San Simeon on the central California coast near Paso Robles caused total damages of more than $230 million.5 January 1994 – The 6.7 magnitude Northridge earthquake caused 61 fatalities and $26.3 billion in insured losses in the Los Angeles area.6

Domestically, markets are restricting capital or seeking higher rates of return. All-risk admitted carriers are also pulling back limits on earthquakes. The emphasis on higher returns in the earthquake market comes as insurers seek to improve profitability across other sectors.

That retrenchment spurred escalating price increases from the first through the fourth quarter of 2019 that look to continue into 2020. Insureds are looking at higher premiums and deductibles. While rates are moving higher, increases have been inconsistent, varying from account to account. Some carriers are seeking higher prices in specific areas of higher risk as they seek to address their own aggregations. While rates in general are moving up from 20% to 25%, some accounts may see increases of 10% to 15% while others see 30% to 40%.

Deductibles, for the most part, start at 5%. Insureds who currently enjoy a lower deductible, should not expect carriers to renew at that level. In many cases, deductibles are being used as a means to manage premiums to make coverage more affordable. Insureds may want to look at how incremental increases in deductibles can yield price breaks on premiums.

Modeling results remain a key factor in the market. While the models have not changed recently, the rate of return that insurance companies are looking for has definitely firmed. That reliance on modeling results may help better prepared clients with more complete data.

Data is playing an increased role in obtaining coverage and in helping to manage premiums. The more detailed information that insureds can supply, the better the response they can expect from carriers. Insured that can provide additional information, for instance on retrofitting, can help improve their modeling results and potentially gain some credits from carriers.


In an uncertain market, being proactive is the key to obtaining the best results. When it comes to renewals, getting an early start is crucial. Providing more detailed data, particularly as it regards to retrofitting, can help yield better results for clients. Knowledgeable brokers that have broad access to markets across the industry can obtain a broader range of quotes and help insureds find the coverage that meets their financial and risk management goals.

Contact your CRC Group producer for more information.


  • Ted Clayton is President of CRC’s Santa Ana office and is an active member of the Property Practice Advisory Team. Ted specializes in property and marine business.
  • Phil Mazur is President of CRC’s San Francisco office and an active member of the Property Practice Advisory Team. He specializes in difficult to place property risks, including California earthquake.


  1. Ridgecrest earthquakes caused up to $5 billion in damages at China Lake naval base, Los Angeles Times, Aug. 14, 2019,
  2. South Napa Earthquake scars remain after 3 years, Napa Valley Register, Aug. 23, 2017, 546f-bd83-9c5a1f9854f6.html
  3. Earthquake insurance and risk, Insurance Information Institute, March 24, 2020,
  4. 10 years later; The earthquake of 2010, North Cast Journal, Jan. 8, 2020,
  5. San Simeon earthquake shattered the calm of a sunny December morning in 2003, The Tribune News, Dec. 21, 2013,
  6. Earthquake insurance and risk, Insurance Information Institute, March 24, 2020,