The percentage is higher for commercial risks, ranging between 30–40% in major cities, but it is still far from full market coverage.

In many counties, fewer than 10% of residential buildings are insured against earthquakes, and coverage only approaches 25% in highly exposed metropolitan areas. This awareness contrasts with the low density of earthquake insurance coverage in California. Building construction standards are among the strictest in the world, and the annual “Great ShakeOut” catastrophe drill, which has become a worldwide day of action, reminds people how they can best protect themselves when an earthquake happens: get on your knees, crawl under a piece of furniture and stay there with an arm across the nape of your neck.

Given its history of past earthquakes, awareness of the risk is relatively high in California. Of course, no one knows exactly when the next shock will take place – whether on the Hayward or on another fault. Seismologists consider the probability of a severe earthquake on the Hayward fault to be among the highest in California. The impact can be seen with dramatic clarity in old photographs of a kerbstone in the city of Hayward, east of San Francisco: one end of a street curb lying directly above the fault that bears the town’s name has crept several centimetres over many years, creating an offset in the curb and road. Buckled roads bear witness to the inexorable force of tectonic plates sliding past each other at a rate of centimetres per year. The danger posed by nature can be seen in many places in California, with gorges and ravines providing evidence of the state’s active geology. Models suggest that a very severe quake affecting San Francisco and Los Angeles would cause direct losses of US$ 300bn, as well as widespread indirect economic impacts not included in that figure. Fault lines such as the San Andreas Fault traverse California, where the Pacific and North American plates are sliding past each other. The West Coast of the USA is highly vulnerable to severe earthquakes.

For Munich Re, it was the largest natural catastrophe loss event of all time in relation to premium income – even more severe than Hurricane Katrina in 2005 and the Tohoku earthquake in Japan in 2011. It remains the USA’s most expensive natural catastrophe ever in relation to the country’s overall economic output. California’s last extreme earthquake was the San Francisco earthquake in 1906.

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