The 1906 earthquake and Hurricane Katrina: Similarities and differences – Implications for the insurance industry
On 29 August 2005, Katrina made landfall south of Buras, Louisiana, on the US Gulf Coast. Total economic losses from Katrina are now estimated at about US$ 125bn, of which US$ 45bn is insured in the private market. In the first days after the event, its full dimension and the extent of losses – both insured and uninsured – were seriously underestimated. In consequence, many questions have been raised about risk assessment. Was Katrina a unique case or are there lessons to be learned with regard to large disasters in general? The 100th anniversary of the San Francisco earthquake of 18 April 1906 and the 70% odds of a large earthquake striking the Bay Area within the next 30 years (WGCEP, 2003) provide an urgent reason to address this question. Total economic losses from Katrina amount to about 1% of the US GDP, and insured losses represent about 10% of the annual property premium written in the US market. This compares to the 1.8% of the GDP lost as a result of the San Francisco earthquake of 1906. A comparison of insured losses is not possible as figures for the annual market premium are not available.
