VANCOUVER (NEWS 1130) – The massive earthquake expected to hit our region within the next 100 years or so is the stuff of nightmares. And what you might not be so aware of is what the economic aftermath could be.
If the earthquake is on the upper scale of what seismologists predict, that could result in tens of billions of dollars worth of damage.
In the view of the author of a new report from the CD Howe Institute, the former top dog of the national banking regulator claims the insurance industry could still survive here if the damage is within the $25 billion to $30 billion range.
Even then, Nicholas Le Pan, who led the Office of the Superintendent of Financial Institutions, says some insurers would go under. And the real trouble will come if the damage exceeds the figure of $30 billion.
In that case, Le Pan claims multiple national insurers would fail and he’s calling for preventative steps to be taken. “Since the 2007/08 financial crisis, policymakers have paid much attention to the buildup of risk in the banking system,” says Le Pan. “However, no equivalent discussion exists for the impacts of natural disasters to Canada’s economy.”
Specifically, he wants the industry funded compensation scheme to be strengthened. “As part of any Canadian reform package, it is important to bolster the Property and Casualty Insurance Compensation Corporation to deal with insurance industry problems and reduce systemic impacts from severe catastrophes,” says Le Pan. “This would also reduce the likelihood a federal financial commitment would be triggered and, if triggered, would have minimum costs.”
As for the odds of a massive earthquake — there’s a one-in-three chance it hits in the next 50 years on the BC coast.