Fire Following

EARTHQUAKE INSURANCE The fire next time

What it would cost to prevent $10 billion in damage due to fires following a B.C. earthquake

BY DAVID GAMBRILL, Editor-in-Chief

Fire following a major earthquake in the Lower Mainland of B.C. could cost the Canadian property and casualty insurance industry a median of $10 billion in insured claims, according to a report commissioned by the Institute for Catastrophic Loss Reduction (ICLR).

The price tag could be significantly reduced if local public authorities made three investments that would cost only a fraction of the projected damage tally, the report’s author told Canadian Underwriter in an interview.

In its report, Fire Following Earthquake in the Vancouver Region, ICLR projected what might happen if five modelled earthquakes — all varying in magnitude from 6.8 to 9.0 — struck various regions in and around the Lower Mainland of B.C.

“Earthquakes are sometimes followed by major fires, whose damage can greatly exceed the shaking damage,” the author of the study, Charles Scawthorn, wrote. Scawthorn is an internationally renowned authority on the mitigation of natural and technological disasters.

“Accounting for fire department response, water system damage, weather and other conditions, the growth and ultimate final burnt area of fires are estimated to result in losses from nil to $10 billion,” the report states, noting these are median estimates, which vary according to the specific details of the earthquake scenario. This loss would be virtually fully insured and would have a very significant impact on the Canadian insurance industry.

“Fire losses would come on top of shaking and other losses, which would be insured to a lesser extent,” the report goes on to say. “A leading global reinsurer has stated that losses of this magnitude would likely result in failure of some insurers, would entail secondary and contingent losses, and could conceivably lead to financial contagion.”

These damage estimates could be reduced significantly if Vancouver follows three main recommendations contained in the report, Scawthorn said.

The first recommendation is to develop an integrated regional portable water supply system of hose tenders (basically fire trucks that can carry high-volume hoses) and hose reels, with compatible fittings, that can be used to access alternative water supply sources and relay water to the fireground.

Second, an automatic secondary onsite water supply should be established for sprinklers in high-rise buildings and buildings with floors higher than 75 feet above the lowest level of fire department vehicle access.

And third, there should be a review of the ability to control and isolate the gas transmission and distribution networks in the event of a major earthquake. Plus, the gas distribution operator should

consider incorporating an automatic gas shutoff device in gas meters.

Among these recommendations, the big-ticket item would likely be $20-40 million for 20 new hose tenders and pumps for the Lower Mainland of B.C.

“The bottom line is we are talking about maybe 20 of these [hose tenders],” Scawthorn said. “The gold-plated version of these things is maybe $1 million, so we are talking about 20 times $1 million. So that’s $20 million for these hose tenders, and then for some of these pumps, maybe another $15 million to $20 million. So, let’s say around $40 million.

“And that’s spread out over, say, four years. So, $10 million per year for four years, for a city of perhaps 2.5 million people? I mean, that’s a noise-level expenditure. It’s nothing.”

As for the cost of installing a secondary water supply for high-rises, Scawthorn says it’s not an issue for newly constructed buildings. “It’s just part of the cost of doing business,” he said. “For a high-rise building, it’s not even pennies on the quarter. Ballpark for a high-rise building, maybe we are talking about $100,000. They spend that much on carpeting in the lobby. It’s nothing.”

Retrofitting the older high-rise buildings with a secondary water supply might appear to be a greater challenge, although Scawthorn said it would likely mean filling up two spots in the parking lot with water tanks. “The biggest obstacle there is that Vancouver has gone through a building boom over the past 20 years, and put up 1,000 high-rises,” he said. “They are all sprinklered, but they didn’t put in a secondary water supply…Why that is not in the building code, I do not know.”

Finally, automatic gas shutoff meters should be installed in advance of a quake. There are two parts to this recommendation, Scawthorn observes. One is to install “block valves,” which operate remotely and are triggered by a seismic device. The second is to build seismic set-off devices into the gas meters of individual Vancouver consumers who use gas. The cost for the meters would be negligible; most of the cost would be the labour to retrofit the gas meters in B.C. homes.

FortisBC delivers natural gas, electricity and other energy solutions to approximately 1.2 million customers in 135 communities throughout B.C.

“Fortis is on record as saying they are intending to replace every gas meter to save a few bucks for gas meter readers, so they are going to replace every one of these meters anyway,” Scawthorn said. “So, all we are asking is to build this [set-off device] into the new meters you are going to put in. Japan did that. It’s a very simple little device. It works very well, it doesn’t cost a lot of money.”

The bottom line is that money is not the issue, Scawthorn said. The question is whether there is a political will to implement the report’s recommendations.

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