Addressing Earthquake Risk in North America
An ever-present yet highly unpredictable threat, earthquakes continue to pose a material risk across North America—particularly in California, the Pacific Northwest, Mexico, and parts of Western Canada. While seismic activity is less frequent than many weather-related perils, earthquakes remain a classic peak risk with severe tail exposure, low insurance penetration, and a persistent protection gap.
In the United States alone, earthquakes generate an estimated $14.7 billion in economic losses annually—according to updated FEMA and USGS models—yet less than 20% of earthquake-related losses are covered by insurance. As asset concentrations continue to grow in high-hazard urban areas, parametric earthquake layers offer organizations a way to reinvest savings from their traditional programs into buying down high deductibles and topping up sublimits for comprehensive seismic protection.
For organizations operating in exposed regions, parametric insurance provides an additional protection and rapid liquidity, helping strengthen financial resilience.
How our parametric earthquake cover works
Descartes structures customized earthquake covers using objective seismic data from leading institutions such as the USGS. Coverage is triggered when a predefined earthquake index—such as Magnitude, Peak Ground Acceleration (PGA), or Modified Mercalli Intensity (MMI)—reaches an agreed threshold at the insured location. Payouts are based on pre-agreed structures, eliminating lengthy claims adjustment processes and accelerating financial recovery.
Feature | Traditional insurance | Descartes’ parametric |
Claims & loss adjustment | Loss assessed on-site. Subjective, complex, open to dispute. | Triggered by independent third-party data. Objective and transparent. |
Payout timeline | Months, sometimes years, of adjustment. | Days to weeks after the event. |
Use of funds | Usually restricted to repairing physical assets. | Flexible. Covers any financial loss, including non-damage business interruption. |
Coverage | Off-the-shelf, limited room to customize. | Tailored to your exposure and budget. |
Risk period | Annual or long-term agreement. | Flexible to match client needs. |
Where a parametric earthquake layer fits
Parametric is most powerful as a complement to your existing program. In today’s market, it allows organizations to reinvest premium savings into closing the structural gaps a traditional policy leaves open.
The most common ways clients put it to work:
- Buy down a high deductible: reduce retained exposure while maintaining access to traditional earthquake markets.
- Top up a sublimit: secure additional protection where traditional earthquake capacity may be insufficient for a major seismic event.
- Cover non-damage business interruption: protect against revenue loss caused by area closures, utility disruption, evacuation orders, or supply chain interruption.
- Secure immediate liquidity: access rapid funds to support emergency response, reconstruction, and business continuity.
- Wrap an exclusion: address earthquake-related exposures that may be excluded or only partially covered by traditional policies.
Energy & Renewables
Ground shaking damages generation assets, disrupts operations, and delays power restoration.
Retail & Consumer Goods
Store closures, supply chain disruption, and reduced foot traffic impact revenue and operations.
Financial Institutions
Seismic events disrupt operations, reduce business activity, and create liquidity pressures.
Hospitality
Property damage, evacuation orders, and travel disruption reduce occupancy and revenue.
Construction
Ground movement damages projects, disrupts worksites, and delays construction timelines.
Public Entities
Infrastructure damage and service disruption increase emergency response and recovery costs.
Manufacturing Industry
Facility damage, utility outages, and supply chain disruption interrupt production and revenue.
Our case studies are all over the world
Utilizing Machine Learning and real-time monitoring from satellite imagery & IoT, our state-of-the-art technology helps businesses bounce back faster against climate, cyber and other emerging risks.
Who it’s for
- Public infrastructure owners: protection for roads, bridges, dams, and other critical infrastructure exposed to seismic events.
- Industrial facilities: coverage for manufacturing plants, processing facilities, and operational assets vulnerable to earthquake damage and disruption.
- Strategic supply chain assets: protection against operational interruption affecting critical logistics and supply chain infrastructure.
- Underground networks & utilities: support for operators of pipelines, utility networks, and essential services exposed to seismic risk.
- High-value property owners: additional protection for commercial property portfolios located in earthquake-prone regions.
Parametric coverage in 4 steps
Assess
We assess and evaluate the client’s earthquake risk exposure, leveraging our proprietary risk model.
Customize
Design a customized cover fit to the client's unique needs, in which payout structures are indexed according to earthquake intensity.
Monitor
Upon policy inception, we monitor the insured's location to determine whether a qualifying earthquake has occurred.
Payout
The insured receives a payout within days of reporting a loss, accelerating financial recovery and reconstruction.
FAQ
For more information on parametric insurance, triggers, claims processes, coverage structures, and drought-related solutions: Descartes FAQ Hub
What is an earthquake?
An earthquake is the sudden and violent shaking of the ground caused by movement between tectonic plates along fault lines in the earth's crust. Earthquakes produced by man-made activity, such as fracking, are not covered under Descartes' parametric earthquake policy.
How do you measure the intensity of an earthquake?
Descartes' parametric earthquake covers rely on measurements of Peak Ground Acceleration (PGA), an estimated calculation published by the United States Geological Survey (USGS) that reflects the intensity of ground shaking at a given location.
Why is PGA preferred over a magnitude measurement?
Magnitude measures the seismic energy released at an earthquake's hypocenter, as determined by seismographs. While there is a single magnitude for a given event, the peak ground acceleration experienced can vary by location depending on the distance to the hypocenter.
What is magnitude, and how does it differ across locations?
Magnitude indicates the overall energy released during an earthquake but doesn't express the level of ground shaking at a specific location. PGA maps provide an estimate of ground shaking intensity, and therefore a better indication of the extent of possible damage at each location.
How is an earthquake policy triggered?
A policy is triggered when the measured index exceeds the predefined threshold agreed in the payout structure.
What types of damages are covered?
A parametric policy covers any economic loss sustained from a triggering event, including but not limited to property damage, business interruption, and non-damage business interruption. There is no requirement for direct physical damage to trigger coverage.
How does the claims process work?
1) The data provider releases the earthquake event data.
2) The calculation agent retrieves the data and informs the insured of the parameters and corresponding loss.
3) The insured submits basic information on the financial losses caused by the earthquake.
4) After the event report and declaration of loss are received, payment is released.
How quickly does the client receive payment after submitting a loss declaration?
Payment is typically released within two to three weeks of receiving the declaration of loss.
Is this a standard cover, or can it be tailored?
Coverage is tailored to each client's needs, whether used as a deductible buy-down, an excess layer, or to fill gaps left in a traditional program.
Contact Us
Whether you're quoting a complex risk, looking to break into new markets, or just curious about parametric insurance, our team is here to help you win. Reach out and we will get back to you within 48 hours.
