CoreLogic Examines Financial Implications of the HayWired Earthquake Scenario

—An Insurance Analysis of the Series of Earthquakes that Could Occur Along the Hayward Fault—

IRVINE, Calif. — (BUSINESS WIRE) — April 18, 2018 — CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released “ Financial Implications of the HayWired Scenario.” This report theorizes the financial impact of the HayWired earthquake scenario. The analysis by CoreLogic examines the potential damage and insured losses if this hypothetical scenario, as defined by the United States Geological Survey (USGS), were to occur, including the effects of construction, property valuations, buy-rates, incremental damage resulting from aftershocks and hours clauses for insurance conditions.

The Hayward fault is one of the most dangerous faults in the U.S. It is located beneath the densely populated and economically vital communities of the San Francisco East Bay and represents a clear and present danger of hosting a catastrophic earthquake. The HayWired earthquake scenario is comprised of a series of reports from the USGS and a coalition of multi-disciplined contributors describing a hypothetical magnitude 7.0 earthquake along the Hayward fault followed by 16 aftershocks ranging in magnitude from 5.0 to 6.4.

Should this hypothetical scenario occur, CoreLogic found that more than 1.1 million homes are likely to sustain visible damage, with a smaller number expected to be functionally impaired as a result of the main earthquake and subsequent aftershocks. The total damage to private property for the entire scenario is estimated to be $170 billion, with only a small fraction of damages insured. Of this small fraction, insurance payments to property owners are estimated to be approximately $30 billion, less than 20 percent of the overall damage, primarily due to the low purchase rate of earthquake insurance. The $140 billion financing shortfall ($170 billion less $30 billion in insurance) presents a real risk to effective regional recovery. The potential for systemic impacts triggered by the lack of insurance is noted as particular concern as a significant portion of the property damaged by the earthquake serves as collateral for property mortgages.

The estimated financial impact of the main shock, as well as the effects of subsequent aftershocks, is as follows:

 

Table 1: Direct Damage from Main Shock

     

($ Billions)

 

Total

 

Residential

 

Commercial

Ground-Shaking

$140 $60 $80

Fire Following

$2 $1 $1

Sprinkler Leakage

$2 $1 $1
 
 

Table 2: Insured Loss from Main Shock

     

($ Billions)

 

Total

 

Residential

 

Commercial

Ground-Shaking

$26.5 $5.3 $15.9

Fire Following

$2 $1 $1

Sprinkler Leakage

$2 $1 $1
 
     

Table 3: Cumulative Direct Damage from aftershocks
(automobile damage included in residential and commercial)

 

($ Billions)

Total

 

Residential

 

Commercial

Ground-Shaking

$24 $9 $15

Fire Following

$0.05 $0.02 $0.02

Sprinkler Leakage

$0.6 $0.1 $0.5
 
 

Table 4: Cumulative Insured Loss from aftershocks

 

($ Billions)

 

Total

 

Residential

 

Commercial

Ground-Shaking

  $4.4   $0.9   $3.5

Fire Following

$0.05 $0.02 $0.02

Sprinkler Leakage

$0.6 $0.1 $0.5
 

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