OIC WA | 360-725-7009 | P.O. Box 40255 Olympia, WA 98504-0255
2017 Earthquake Data
Call Report
January 2018
Mike Kreidler, Insurance Commissioner
www.insurance.wa.gov
2017 Earthquake Data Call Report
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Table of contents
2017 Earthquake Data Call Report ......................................................................................... 1
Introduction .............................................................................................................................. 3
Who has property insurance? ......................................................................................................... 6
Residential ...................................................................................................................................... 6
Commercial .................................................................................................................................... 8
Who has earthquake coverage? ...................................................................................................... 9
Residential ...................................................................................................................................... 9
Commercial .................................................................................................................................. 10
Who offers earthquake coverage? ................................................................................................ 11
Market Share ................................................................................................................................ 11
Residential .................................................................................................................................... 11
Commercial .................................................................................................................................. 13
How is earthquake coverage offered? .......................................................................................... 15
Residential .................................................................................................................................... 15
Commercial .................................................................................................................................. 16
Where is earthquake coverage offered? ....................................................................................... 17
Residential .................................................................................................................................... 17
Commercial .................................................................................................................................. 19
How large is earthquake exposure? ............................................................................................. 21
Residential .................................................................................................................................... 21
Commercial .................................................................................................................................. 22
What is the quality of earthquake policies? ................................................................................. 23
Residential .................................................................................................................................... 23
Commercial .................................................................................................................................. 24
Methodology .......................................................................................................................... 25
Instrument ...................................................................................................................................... 25
Questions ..................................................................................................................................... 25
Market Data .................................................................................................................................. 26
Data Validation ............................................................................................................................. 26
Implementation ............................................................................................................................... 26
Issuance ....................................................................................................................................... 26
Outreach ....................................................................................................................................... 26
Revisions ...................................................................................................................................... 27
Data cleaning .................................................................................................................................. 27
Conclusion ............................................................................................................................. 28
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Executive Summary
Washington State has documented earthquake risk, but prior to this study there was no data showing
how many properties are covered by earthquake coverage. In 2017, Commissioner Kreidler directed a
survey of insurers in Washington State. This study found:
• Approximately 21% of all insured structures in Washington have earthquake coverage.
• The market has many insurers and policies are available to buy.
• 90% of the exposure is west of the Cascades and the commercial and residential properties in
this area are more highly insured than east of the Cascades.
• Residential coverage rates for earthquake insurance came in higher than predicted, at 11.3%.
o Counties west of the Cascades have a slightly higher overall coverage rate at 13.8%, as
compared to eastern counties which have just a 1.7% overall coverage rate.
o Residential earthquake deductibles are generally between 10% and 15%.
o The top two insurers sell 33.9% and 18.1%, respectively, of all policies with earthquake
coverage and represent more than 50% of the overall exposure.
o Homes with earthquake insurance are 65% more expensive than the average home,
which indicates a potential affordability issue for owners of more modest homes.
• Commercial coverage rates for earthquake insurance statewide is 43.2%
o Of commercial earthquake policies, 83.4% are west of the Cascades.
o Three companies sell 49.5% of all policies, while just one insurer holds 52.1% of the
insured exposure.
o Commercial properties with earthquake coverage were 11% more valuable than the
typical commercial property.
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Introduction
Because of our geologic setting over many active fault lines, Washington state is recognized as one of
the highest-risk areas in the world for earthquake events. Earthquakes occur here nearly every day; most
are too small to cause damage or even be felt. But as recent history demonstrates, the risk of a larger
earthquake is ever-present, with the potential for extensive damage to property and infrastructure.
For example, on Feb. 28, 2001, a 6.8 magnitude earthquake struck the southern Puget Sound region,
with an epicenter northeast of Olympia. The Nisqually quake resulted in more than 400 injuries and
significant property damage. Much of the damage occurred close to the epicenter or in more distant
unreinforced concrete or masonry buildings. In total, the Nisqually quake resulted in approximately
$305 million of insured losses, and $2 billion in damage statewide. In 1999, the slightly smaller
5.8 magnitude Satsop earthquake caused $8.1 million in property damage (including the repair and
retrofit of the historic courthouse in Montesano).
We continue to learn more about the risk of our position on the Cascadia Subduction Zone, which is
predicted to result in a magnitude 9.0 subduction zone earthquake. Comparison with similar subduction
zone fault earthquakes around the world underscore the enormous potential impact of this event. For
example, the cost to rebuild Christchurch, New Zealand, is estimated at over $33.9 billion after the
February 2011 earthquake.
As Washington state’s Insurance Commissioner and Chair of the National Association of Insurance
Commissioners’ Climate Change and Global Warming Working Group, Mike Kreidler has acknowledged
the need to better prepare the state for disasters. Insurance coverage, of both residential and
commercial property, is a key component to recovery from an earthquake event. As part of his effort to
encourage Washington’s resiliency to earthquake events, he has directed an assessment of commercial
and residential earthquake coverage throughout the state. The purpose of this assessment was to
provide baseline data about the coverage
1
rate of earthquake coverage currently purchased in
Washington, and to assess the need for improvement.
2
In October 2017, the Office of the Insurance Commissioner issued an earthquake insurance data call to
108 property and casualty insurers participating in Washington’s homeowner’s and earthquake markets
during the 2016 plan year. We received completed responses from 240 companies (many from non-
admitted insurers selling coverage in the surplus lines market). In total, the data we received represents
more than 80% of the total earthquake insurance market in Washington.
Based on analysis of the data received, we are able to make the following observations and conclusions.
Washington state has a diverse earthquake insurance market with a broad choice of insurers. Although
the highest population counties have the largest number of insurers, policies are available across the
1
The “coverage rate” of an insurance product is the percentage of people who purchase a type of coverage.
2
This data call did not ask for premium cost or demographics of the insured. Rather, we focused mainly on the
property value and location of insured properties.
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state. Insurers, in general, do not appear to specialize the offering of coverage in certain regions, with
more than 22 insurers offering policies in every county in the state. The commercial earthquake market
is dominated by surplus line insurers, but more than 100 insurers offer policies in the state.
There are a few strong market leaders in both the commercial and residential market. In the commercial
market, one insurer (a surplus line insurer) covers 52.1% of the insured exposure. Three companies issue
49.5% of all the policies in the market. Similarly, in the residential market the top two insurers cover more
than 50% of overall risk exposure.
The coverage rate of residential earthquake insurance is unexpectedly strong; 11.3% of all residential
policies in the state carry earthquake protections. While Washington’s coverage rate does not adequately
mirror the projected risk, our rate can be compared with other high-risk states such as California, which
has a coverage rate of approximately 10%. Residential earthquake deductibles are generally in line with
the industry standards of between 10% and 15%. Almost all the participating residential insurers offered
coverage as a policy rider.
Property value is a strong predictor of which properties are covered by earthquake insurance. Homes with
earthquake insurance are 65% higher in value than the average insured home. Commercial properties
with earthquake coverage were 11% more valuable than the typical insured property. This is true even
though the cost of earthquake insurance is generally based on the value of the property (which results in
less expensive insurance for less expensive property).
And, as expected based on the higher documented risk of earthquake, counties west of the Cascades
buy more insurance. In Western Washington, the residential coverage rate is 13.8%. Counties west of
the Cascades have 18 times as many policies as in Eastern Washington. Of commercial earthquake
policies, 83.4% are in Western Washington.
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Who has property insurance?
This data call focused mainly on the property value and location of properties, meaning the
demographics of the insured are not fully represented in the submitted model. However, most insurers
seem to base rates on the characteristics of the property more so than on the characteristics of the
individuals applying. As this survey specifically distinguished between rental properties (included in
commercial reporting) and owner-occupied structures (included in residential reporting) OIC assumed
that the insured housing value is directly related to income. Similarly, for commercial structures the OIC
assumed that more expensive structures are held by companies with greater revenue. This correlation is
not quite as strong given that OIC requested structure information, and commercial interests, such as
property management companies and retail chains, will generally have a large number of inexpensive
properties despite being relatively high earners.
Residential
Statewide
Insurers in Washington state reported the average insured residential property was covered for
$469,000. In contrast, the average property in our sample was insured for $512,000, indicating a skew
toward more expensive properties. This is not surprising given that King County represented 27.7% of
our sample, at an average insured value of $687,000. However, the median home value in Washington
during the sample period was only $323,000 (Rumstead
). On a county-by-county basis, the insured
properties in this sample exceeded the median home values by 105%, with some rural counties
exceeding the county average by over 300%.
By county
Most homeowner’s insurance policies cover “structure and contents” under a single policy. This includes
not only the structure appraised value but also an “excess” value, which accounts for differences in
replacement costs and new construction costs, as well as additional contents coverage for items
destroyed during a loss that are considered personal property and not part of the structure. The value
of contents and excess coverage varies by insurer but generally falls at about 20% to 40% above the
appraised value of the property.
In the data collected in this call we observed a 45.2% difference between the average of averages (AoA,
the average value of all county averages) and a 58.5% difference in structure average (by policy
coverage) compared to the median home value. Based on county averages, four counties in this data
set could be argued to have close to representative coverage, with coverage amounts for a general
policy based on the difference between insured value and median property prices. In Jefferson, King,
Snohomish, and Whatcom counties the difference in insured value and median home price is less than
30%. This indicates that for much of the state the covered residential properties are on average more
expensive structures than the average residential property on a county-by-county basis.
Insurer characteristics
At the insurer level, only 17 of 92 insurers that submitted residential data covered structures with an
average coverage amount above the insurer AoA. This is indicative of a distribution of house prices
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skewed toward lower values in some areas of the state. This is consistent with the generally lower value
of properties in Eastern Washington, but also indicates that there may be some concentration of
policies for higher-priced homes for a few insurers. Examining the insurer average property coverage
makes this distribution even more distinct. Five insurers stated that their average residential coverage
amount exceeded $1 million while nine insurers covered an average structure value of under $100,000.
However, unequal distribution of policy coverage does not imply that any particular county lacked
access to choice for property insurance. This sample contained 35 or more companies with at least one
active policy in every county, and a median of 63 companies with policies per county statewide.
The relatively even distribution of insurers offering policies, combined with the relatively extreme
variance in coverage averages between companies, indicates that property specialization based on
value is occurring in the residential market.
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Commercial
Statewide
Insurers in the state of Washington reported an average insured commercial property was covered for
$6.5 billion. In contrast, the average property in our sample was insured for $3.1 billion. As with
residential policies, King County represented the largest portion of policies reported, as 29.4% of our
sample with an average insured value of $5.2 billion. The commercial property market is significantly
more diversified than the residential market, making an accurate median value unavailable. Sales prices
are also not of particular use as many commercial buildings are purchased as land transactions, with
customized structures added later.
By county
Unlike the residential market, the commercial market does not have a standard type insured structure.
While residential properties are generally single-family homes, commercial properties range from high
rises in King County, to massive farms in Eastern Washington, to corner stores spread across the state.
This means that comparing counties is exceedingly difficult as each county features a different mix of
structures. Similarly, it is difficult to draw conclusions for the types of properties insured in this market
without a valid median property price to compare to it. However, the data does distinguish between
areas with large industry (King, Pierce, and Clark counties) and those lacking industry (Island and San
Juan counties) based on the average value of insured properties in the county. However, more
diversified economies such as Thurston and Spokane counties are impossible to classify based on
available data.
Insurer characteristics
Insurers selling in the commercial market most often sell policies covering structures with a value below
the data average. For both AoA and county average values, less than 25% of insurers held exposure
above the group averages. This again indicates a skew toward lower value structures. This skew is
exacerbated by three companies whose average coverage value exceeds $100 million, which is more
than three times the average value of the next highest average value company. This is clear evidence of
specialization by property value.
Like the residential market, the commercial market provides for a large selection of insurers in every
county in the state. No county had less than 48 insurers with active polices in 2016, and no county had
more than 91% of the 194 insurers included in the survey with commercial lines with active policies
during the period.
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Who has earthquake coverage?
The standard coverage policy specifically excludes damage from earthquakes. While a sizeable number
of homeowners and businesses have coverage A policies, relatively few have earthquake coverage. In
this dataset, approximately 21% of all insured structures in Washington have some sort of coverage for
earthquake related damage. However, this coverage rate is higher for commercial properties and is
unevenly distributed across the state.
Residential
The residential market for earthquake coverage is driven by an increased risk for earthquakes in
Western Washington, but policies for this type of coverage are available statewide. Overall, 11.3% of all
residential policies in this data set have some type of earthquake coverage. Western Washington
counties have a slightly higher overall coverage rate at 13.8%, especially compared to Eastern
Washington counties which have just a 1.7% coverage rate. The coverage rate in Western Washington is
led by Thurston County, with 18.1% of policies covering earthquake damage, followed by Clark and
Kitsap counties at a rate of 16.4% and 16%, respectively. The lowest coverage rate in the state is
Columbia County, where just .02% of policies have earthquake coverage.
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Commercial
The commercial market is primarily covered for earthquake by surplus line companies that sell
earthquake policies as stand-alone products. As such, some commercial structures may be double
counted as having both a policy with earthquake and without earthquake coverage. This data set also
suffers from a selection bias as we received a much larger number of responses from surplus line
insurers than admitted insurers in this market.
Even with these caveats, businesses in general seem to be more risk adverse than homeowners in
Washington state. Statewide, 43.2% of policies in our data have some sort of earthquake coverage. Like
in the residential market, the Western Washington commercial market has a slightly higher rate of
coverage at 45.4% compared to 27.5% in Eastern Washington. Unlike the residential market, the
counties with the highest coverage rate are also some of the smallest with Skamania, Island, Kitsap,
Wahkiakum, and Pend Oreille counties each boasting a greater than 55% coverage rate. Even the much
larger King County, which represents 28.1% of all policies in the commercial market, has a 45.2%
coverage rate.
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Who offers earthquake coverage?
The earthquake market is competitively distributed among dozens of insurers, with a small number of
insurers holding larger market shares. This is true in both the residential and commercial markets.
However, in the commercial markets the insurers are heavily represented by surplus line (non-admitted)
insurers while the residential market is almost exclusively comprised of admitted insurers. This
discrepancy indicates that the two markets operate in a fundamentally different way. The methods
which insurers offer coverage is important to this distinction.
Market share
In general, a few residential insurers dominate the overall number of policies offered in both markets. In
our data only three companies represent more than 5% of the market (combined residential and
commercial), but these top three companies represent a larger market share than the next 12 largest
companies by number of policies. The largest insurer represents just under 17% of the market while the
top 30 insurers represent only 81.4% of the market. In response to OIC’s data call, 78% of all admitted
insurers and every surplus line insurer indicated that they covered at least one property for earthquake.
Residential
The residential market for earthquake insurance is almost entirely made up of admitted insurers. Of
these insurers, two sell more than half the residential earthquake policies in the state. The top overall
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seller clearly dominates this market with 33.9% of the general policies and 20% of all earthquake
policies in our data. By contrast, the second-ranked company represents only 1.5% of the overall market
for homeowners insurance, but sells 18.1% of all earthquake policies in our data. This is partially
because they specialize in earthquake coverage, so all of their policies include earthquake coverage, but
also partially because the company is particularly active west of the Cascades.
These same two companies hold an outsized portion of the exposure in the residential earthquake
market. In our data, these companies represent more than 50% of the exposure with both companies
each holding more than four times the exposure of the third-ranked company. However, both
companies hold this exposure more by the volume of policies than by the value of the coverage. In both
cases, the average coverage value of the earthquake insured properties is close to the average value of
covered properties found in our survey. It should also be noted that four companies seem to specialize
in high-value earthquake policies. The average exposure for earthquake policies written by these
companies was significantly higher than most, with all reporting an average insured value for
earthquake in excess of $1.75 million.
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Commercial
Unlike the residential market, the commercial market for earthquake is dominated by a few surplus line
insurers with numerous admitted insurers operating at a small scale. Seven of the top 10 market share
holders are surplus line insurers, and the top three overall companies (all surplus line insurers) represent
45.9% of the commercial earthquake policies in our data.
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In terms of exposure, the commercial market is concentrated with one company. One surplus line
insurer holds 21.6% of the policies in the data but 52.1% of the exposure. This is more than eight times
the exposure of the next largest insurer, with the majority of other companies holding less than .05% of
the exposure of this company. Part of the reason for the large exposure is a higher-than-average
insured property value, as well as a large number of policies in King and Pierce counties, two
traditionally expensive markets for commercial real estate.
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How is earthquake coverage offered?
As part of OIC’s data call, we requested information about how insurers offer earthquake insurance.
Each company was asked which of eight methods they were commonly using when offering coverage
to prospective customers. These methods included offering coverage as a sub-limit, policy
endorsement, stand-alone policy, primary/loss limit basis, excess basis, or on a ground up/full value
basis. Companies were also able to indicate if they did not offer coverage or if they offered earthquake
insurance as a surplus line product through their brokers.
Residential
A fair portion (16.3%) of insurers in the residential market do not offer residential earthquake coverage
in Washington. A small number (3.7%) of insurers in the residential market sold policies as surplus line
products only. Of the admitted insurers offering coverage, the vast majority (96.2%) of insurers offered
earthquake coverage as a policy endorsement, with the remaining insurers offering earthquake
insurance as a stand-alone policy. A minority (42.3%) of admitted insurers selling earthquake insurance
offer coverage in multiple ways, most frequently as a policy endorsement or on a primary/loss limit
basis.
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Commercial
In the commercial market, 12% of companies did not offer earthquake policies, and 19% of responding
companies offered coverage as a surplus line product. Only 69% of insurers in our data call offered
commercial earthquake policies as enrolled insurers. Those offering policies generally offered coverage
as a policy endorsement (89.9%), sub-limit (82.6%), or primary/loss limit basis (78.3%). A majority
(57.2%) of insurers also offered coverage on a ground up/full value basis but this offering was almost
always paired with an offering on a primary/loss limit basis. The vast majority (88.4%) of admitted
insurers offered multiple earthquake coverage options in Washington.
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Where is earthquake coverage offered?
Residential
The residential market for earthquake insurance is distributed as might be expected. Western
Washington had over 18 times as many residential earthquake policies in force at the end of 2016 as
Eastern Washington. Large Western Washington counties including King, Pierce, Snohomish, Thurston,
and Clark represent the vast majority of policies. These five counties represent 80.4% of all residential
earthquake policies in Western Washington and 76.2% of all residential earthquake polices statewide.
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In regards to insurers offering earthquake insurance in the residential market, Western Washington has
far more insurer participation than Eastern Washington. Overall, Western Washington averages twice as
many insurers per county as Eastern Washington. No Western Washington County has less than 26
insurers with residential earthquake policies in force at the end of 2016. Eastern Washington had 10
counties with fewer than 26 participating insurers. The five largest counties in Western Washington also
had the most insurers offering policies, with an average of 66 insurers offering policies in these
counties.
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Commercial
The commercial market for earthquake insurance is distributed much like the residential market, with a
majority (83.4%) of policies being written in Western Washington. The top five counties with
commercial earthquake policies are King, Snohomish, Pierce, Kitsap, and Clark, representing 73.1% of all
Western Washington commercial earthquake policies and 60.9% of all commercial earthquake policies
statewide.
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The commercial insurance market is generally less geographically split than the residential insurance
market. On average, 122 insurers sell commercial earthquake coverage in Western, compared to 103 in
Eastern Washington. Instead, the county population is much more highly correlated with the number of
insurers selling in that county.
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How large is earthquake exposure?
Exposure in the earthquake market is fundamentally linked to the coverage rate in most areas of the
state, but this value is also telling with regard to the type of structure being insured. While some small
counties may have low coverage rates, they often seem to have high rates of coverage for more
expensive properties, pushing the value of average covered structure for earthquake higher than the
typical homeowner’s policy.
Residential
Statewide, the exposure for earthquake-insured properties is $181 billion in this data set. This is
approximately 18% of the over $1 trillion in general coverage reported. Twenty counties represent 95%
of the overall exposure, most of which are in Western Washington.
The residential market exposure shows that there is a bias toward earthquake coverage for more
expensive properties. Properties with earthquake coverage represent an excess exposure of $65 billion,
65% more than would be expected of the typical property in the data set.
Western counties are also well represented in the data. Fully 90% of all earthquake exposure is located
in Western Washington. With the exception of Spokane County, all of the top 10 counties by
earthquake exposure are western counties. This is in line with the policy rate.
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Commercial
Exposure for commercial properties is significantly larger than that of the residential market, with a
value insured at just under $2 trillion represented in the data set. Approximately 85% of this exposure --
$1.7 trillion -- is represented by policies with earthquake coverage.
Like the residential market, the commercial earthquake market also tends to have a larger exposure
than the average property in the market. In all, the commercial earthquake market has an excess
exposure of $212 billion compared to average policies, which represents about 11% of the overall
market. The difference in excess is in part due to the larger market penetration of earthquake coverage
in the commercial market and in part due to the market penetration of surplus line companies.
The commercial market is also less biased toward the western counties. Only seven of the 10 counties
with the largest exposure are in Western Washington. This almost perfectly mirrors the population
distribution of these counties and cannot therefore be attributed to a differential in risk.
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What are the deductibles in earthquake policies?
While this data call did not elicit premium information, it did collect information about the deductibles
of the policies issued. In general, earthquake policies have a much higher deductible than typical
homeowner and commercial insurance policies. The deductibles are frequently a percentage of the
insured value of the property. Depending on the company, the insured value is frequently 50% or more
above the appraised value, as these policies also include the contents of the structure.
The net effect of the deductible on many earthquake policies is that they only produce benefit when a
significant portion of the structure is damaged during an event. This makes the “quality” of the policy
important in earthquake prone areas where significant damage is unlikely for a single event but
frequent small impacts are very likely.
Residential
The policies for most structures carry a fairly standard deductible, between 10% and 15% of the insured
value. Three quarters of the companies that reported deductibles reported the most common
deductible for earthquake policies in this range. Policy deductibles ranged from first dollar coverage ($0
deductible) all the way up to 40% deductibles. Several companies also offered fixed-price deductibles
between $100 and $5,000.
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Commercial
Commercial earthquake policies are much more varied in deductible than residential policies. While
about 20% offer policies with a similar 10% to 15% deductible range to residential policies, 25% offer
policies with a 0% to 8% average deductible. More than half of the companies that offer earthquake
coverage in the commercial market do so with a fixed-price deductible that represents, on a percentage
basis, less than a 10% deductible. However, since many of the companies operating in the commercial
market are surplus line insurers, it is impossible to say that these deductibles are comparable to those
found in the residential market. In fact, the surplus line insurers seem to offer policies with deductibles
across the map. Some offer $0 deductibles while others offer 100% deductibles (described by the
company as “excess loss plans”) with no describable pattern in our data.
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Methodology
OIC staff was given general guidelines on the design of the data call by Commissioner Kreidler. Staff
was asked to determine the coverage of earthquake insurance in the Washington market with a focus
on both residential and commercial properties, while also minimizing the length and depth of the data
being requested. This posed a challenge given the property and casualty marketplace is highly varied,
with 864 admitted insurers and hundreds of surplus line insurers participating in the market. Staff
eventually decided on a county-by-county data approach, combined with a short questionnaire which
kept the data requirements at a summary level while still providing sufficient detail for analysis.
Instrument
The data call instrument was designed to elicit an assortment of information regarding both general all
perils policies and specific earthquake coverage of a broad variety of insurers. The data call consisted of
a spreadsheet with three tabs (one for questions, two asking for data) which covered “residential” and
“commercial” separately. In each tab, insurers were also asked about both their all perils policies and
earthquake specific coverage. A copy of the instrument is included in Appendix A.
As this instrument was to be issued to both surplus line and admitted insurers, OIC staff chose to
provide a single, broadly worded survey to all insurers rather than customizing the document for the
type of insurer. Using a single survey simplified implementation but made the specificity of the
response form of utmost importance. To attempt to make the wording as understandable and concise
as possible, OIC staff shared several drafts with both industry and policy experts before arriving at final
language. However, even after extensive comments and multiple revisions, the final draft still caused
confusion for contacted insurers. As such, OIC issued a frequently asked questions (FAQ) document and
made staff available to address insurer questions. The FAQ is included in Appendix B.
Questions
There were seven questions on the survey, which were further differentiated by market (residential and
commercial). The first two questions referred only to typical “Coverage A” or “all other perils” policies
and elicited information about the coverage level and deductible of these policies. The remaining five
questions sought to determine if and how earthquake coverage was offered (question three) and the
coverage of those policies.
All insurers were required to answer the first three questions, but only insurers that offered earthquake
coverage were required to answer all seven. For deductible questions, insurers were given a choice
between reporting the nearest whole dollar value or the percentage for the deductible. Capacity
questions were asked in rounded whole dollars. In all questions, insurers were asked to answer
separately for residential and commercial policies.
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Market data
County level policy data was collected on two tabs titled “residential” and “commercial.” In these tabs
insurers were asked to report the number of policies, number of policies with earthquake coverage, and
the total exposure for each of the state’s 39 counties. For surplus line insurers, it was assumed that
every earthquake policy sold represented a single property and was thus a single policy. This
assumption was provided as guidance as multiple insurers in this market had advised the OIC that they
covered structures in multiple counties with a single policy.
Data validation
The instrument was designed to integrate multiple data validation techniques. Due to the multiple
disparate methods of covering earthquakes available in the market, OIC assumed that there might be
problems with reporting data in both the aggregate (question tab) and by county (data tabs). To
combat this, OIC built in several redundant data reporting questions. These included:
• Asking companies if they offered earthquake insurance and how much.
• Asking companies to provide both a statewide average risk as well as the total risk and number
of policies.
• Asking companies for both an average deductible for earthquake and a range.
OIC also asked insurers to submit data for each of the companies they controlled rather than submitting
aggregated data. This allowed us to cross check between similar companies to ensure that reporting
was internally consistent.
Implementation
Issuance
OIC chose to issue the data call to insurers including surplus line insurers. OIC sent a targeted email to
the 40 largest property and casualty companies based on market share calculated from annual filings
with OIC. OIC also emailed the 40 largest insurers of earthquake specific policies. OIC also recognized
the role that surplus line insurers (non-admitted) play in the earthquake insurance market by requesting
a list of surplus line insurers who may offer earthquake coverage from a large insurer group. The
admitted company groups overlapped substantially, but overall the OIC contacted 108 companies with
a direct requirement to submit data as part of the data call. Other insurers received the data call
through trade associations, postings on the OIC data call website, postings on surplus line associations,
and other insurer groups.
Outreach
Companies that received the data call were given direct contact numbers and emails for OIC staff for
questions relating to the call. OIC also posted a frequently asked questions document (FAQ) to answer
common questions. The FAQ was updated as emails were received. OIC staff also spent significant time
on the phone with insurer representatives working through additional questions and helping insurers
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report on time. This resulted in a large percentage of cross-checked reporting without any issues and
many timely reports.
Revisions
While the majority of insurers were able to get the answers to their questions before reporting, some
insurers either misinterpreted the instructions or reported the wrong data. OIC expected this because
the data call included many non-admitted companies unaccustomed to reporting data to OIC. To
ensure the cleanest and most accurate data was available to Commissioner Kreidler, OIC staff sent
requests for corrections back to directly contacted insurers based on a series of cross checks, some of
which are listed above. A full list of checks and a sample copy of the email sent can be found in
Appendix C. OIC gave insurers a few days to respond because most of the corrections were minor. The
vast majority were able to meet the short deadline.
Data cleaning
Overall the data came in relatively clean. There were a small number of obvious typos (such as a 150%
deductible) as well as some systematic errors (such as reporting in thousands of dollars) which were
corrected without contacting the company. Other larger errors were either corrected by the company or
removed. OIC chose to exclude erroneous data on a row by row basis rather than wholesale to keep as
much data as possible.
The most common errors were missing values in county total exposure. Most of these were for data
rows with less than five policies reported and thus excluded without significant impact. These rows also
tended to have other missing values, which generally indicated that the whole company report was
invalid. Only three companies had their data excluded for this reason, which removed under 100
policies.
Other errors, such as over reporting of earthquake policies by surplus line insurers, were corrected by
OIC staff by assuming that each earthquake policy was also an “all perils” policy. This was an
assumption made early in the design phase of the instrument when OIC staff became aware that
surplus line insurers frequently covered multiple structures across the state under one policy. After OIC
corrections, only a few insurers needed to update their data.
The most severe issue was a systematic missing value for many insurers on question two of the
questions tab. This questions referred to the “median all other perils deductible.” This was intended to
represent values for all policies, but insurers with significant earthquake coverage would often exclude
this value as these policies were not just “all other perils.” OIC has decided to exclude this variable from
certain companies in our analysis due to this issue. However, this value stands as a rate variable so is
only slightly biased by the removals.
2017 Earthquake Data Call Report
28
Conclusion
On many points, this study confirmed our general assumptions about the Washington earthquake
insurance market. Our market is robust, with many companies offering policies. As in other insurance
markets, there are more insurers and policy choices in the more highly populated counties. In Western
Washington, where higher risk of earthquake is well documented, more commercial and residential
properties are insured.
On a positive note, residential coverage rates for earthquake insurance are higher than predicted, at
11.3%. And, as noted above, the rate in Western Washington is even higher, at 13.8%. This rate
compares favorably with other high-risk states.
But there is work to be done.
Although our residential coverage rate is higher than expected, it does not mirror the level of
anticipated risk of property loss. It does not appear that homeowners experience a barrier in finding
available policies. However, analysis of other potential barriers might prove helpful. We note that higher
value homes are more likely to have coverage; from that, we infer a potential affordability issue for
owners of more modest homes. There may also be value in exploring additional educational outreach
about the risk of earthquake and the value of coverage.
Similarly, although commercial coverage rates are fairly strong in Washington, additional analysis of
barriers and opportunities to increase coverage are recommended.
Given Washington’s geologic conditions, the question is not whether a large earthquake, with the
ensuing damage to lives and property, will occur; the question is when. Insurance is a known key to
resilience after disaster, and the issue merits additional priority in this state.
2017 Earthquake Data Call Report
29
Appendix A
1) What is the average coverage A amount of the properties insured…
(Use only whole numbers rounded to the nearest dollar)
a) … for RESIDENTIAL properties?
$
b) … for COMMERCIAL properties?
$
2) What is the median All Perils (except earthquake) deductible…
(Use only whole numbers rounded to the nearest dollar/percentage)
a) … for RESIDENTIAL properties?
$
or
%
b) … for COMMERCIAL properties?
$
or
%
3) How do you offer earthquake insurance? (Choose all that apply)
Residential
Commercial
□
□
My company does not offer earthquake insurance in Washington.
□
□
My company offers earthquake insurance as a sub-limit.
□
□
My company offers earthquake insurance as a policy endorsement.
□
□
My company offers earthquake insurance as a standalone policy.
□ □
My company offers earthquake insurance as a surplus line product through our
brokers.
□
□
My company offers earthquake insurance on a Primary or Loss Limit basis.
□
□
My company offers earthquake insurance on an Excess basis.
□
□
My company offers earthquake insurance on a Ground Up (or Full Value) basis.
If your company does not offer earthquake coverage <STOP>, do not answer questions 4-7 remaining on
this tab; continue on the next two tabs.
4) What is maximum EARTHQUAKE capacity on single risk?
(Use only whole numbers rounded to the nearest dollar)
a) … for RESIDENTIAL properties?
$
b) … for COMMERCIAL properties?
$
5) What is average EARTHQUAKE capacity on single risk?
(Use only whole numbers rounded to the nearest dollar)
a) … for RESIDENTIAL properties?
$
b) … for COMMERCIAL properties?
$
2017 Earthquake Data Call Report
30
6) What is the median EARTHQUAKE deductible…
(Use only whole numbers rounded to the nearest dollar/percentage)
a) … for RESIDENTIAL properties?
$
OR
%
b) … for COMMERCIAL properties?
$
OR
%
7) What deductible range do you offer for EARTHQUAKE?
(Use only whole numbers rounded to the nearest dollar/percentage)
Residential: $ to $ OR % to %
Commercial: $ to $ OR % to %
Instructions:
Residential policies are defined as owner occupied structures where the insured makes their
residence. This includes second homes and vacation houses that are not covered for rental.
Commercial policies are defined as non-owner occupied structures where the insured is an
individual, business, or other entity. This includes, but is not limited to, business locations,
rental units, commercial properties, and agricultural lands.
2017 Earthquake Data Call Report
31
Residential
A) County Name
B) FIPS
Code
C) Dollar ($) Value of
properties (structure
& contents) insured
D) Number of
residential properties
with earthquake
coverage
E) Number of
residential property
policies written
Adams County
53001
Asotin County
53003
Benton County
53005
Chelan County
53007
Clallam County
53009
Clark County
53011
Columbia County
53013
Cowlitz County
53015
Douglas County
53017
Ferry County
53019
Franklin County
53021
Garfield County
53023
Grant County
53025
Grays Harbor County
53027
Island County
53029
Jefferson County
53031
King County
53033
Kitsap County
53035
Kittitas County
53037
Klickitat County
53039
Lewis County
53041
Lincoln County
53043
Mason County
53045
Okanogan County
53047
Pacific County
53049
Pend Oreille County
53051
Pierce County
53053
San Juan County
53055
Skagit County
53057
Skamania County
53059
Snohomish County
53061
Spokane County
53063
Stevens County
53065
Thurston County
53067
Wahkiakum County
53069
Walla Walla County
53071
Whatcom County
53073
2017 Earthquake Data Call Report
32
A) County Name
B) FIPS
Code
C) Dollar ($) Value of
properties (structure
& contents) insured
D) Number of
residential properties
with earthquake
coverage
E) Number of
residential property
policies written
Whitman County
53075
Yakima County
53077
Instructions:
Residential structures,
replacement value,
rounded to the
nearest thousand
dollars.
Include policies where
EQ included in Package,
Fire, Allied Lines,
Commercial Multi Peril
(non-liability portion),
DIC, or mono-line EQ
Any policy that covers
a building to at least
50% of the
replacement cost.
Count one policy with
multiple buildings as a
single policy.
Commercial
A) County name
B) FIPS
Code
C) Dollar ($) Value of
properties (structure
& contents) insured
D) Number of
commercial properties
with earthquake
coverage
E) Number of
commercial property
policies written
Adams County
53001
Asotin County
53003
Benton County
53005
Chelan County
53007
Clallam County
53009
Clark County
53011
Columbia County
53013
Cowlitz County
53015
Douglas County
53017
Ferry County
53019
Franklin County
53021
Garfield County
53023
Grant County
53025
Grays Harbor County
53027
Island County
53029
Jefferson County
53031
King County
53033
Kitsap County
53035
Kittitas County
53037
Klickitat County
53039
2017 Earthquake Data Call Report
33
A) County name
B) FIPS
Code
C) Dollar ($) Value of
properties (structure
& contents) insured
D) Number of
commercial properties
with earthquake
coverage
E) Number of
commercial property
policies written
Lewis County
53041
Lincoln County
53043
Mason County
53045
Okanogan County
53047
Pacific County
53049
Pend Oreille County
53051
Pierce County
53053
San Juan County
53055
Skagit County
53057
Skamania County
53059
Snohomish County
53061
Spokane County
53063
Stevens County
53065
Thurston County
53067
Wahkiakum County
53069
Walla Walla County
53071
Whatcom County
53073
Whitman County
53075
Yakima County
53077
Instructions:
All non-owner
occupied structures,
replacement value,
rounded to the nearest
thousand dollars.
Include policies where
EQ included in Package,
Fire, Allied Lines,
Commercial Multi Peril
(non-liability portion),
DIC, or mono-line EQ
Any policy that covers
a building to at least
50% of the
replacement cost.
Count one policy with
multiple buildings as a
single policy.
2017 Earthquake Data Call Report
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Appendix B
Frequently asked questions of the 2017 earthquake data call.
When is the data call due?
The OIC Earthquake data call is due by close of business (5pm PST) on October 13th, 2017.
What date should my data reflect for my submission?
The OIC Earthquake data call is for policies in place as of December 31st, 2016.
We do not sell property coverage in Washington, do we still have to submit?
No. Only admitted insurers with active policies in Washington State as of 12/31/16 are required
to submit data under this data call.
We do not sell plans with “earthquake” coverage in Washington, do we still
have to submit?
Yes. You may skip questions 4-7 on the “Questions” tab but all other portions must be filled in.
We need more time, can we have an extension beyond 10/13/17?
The OIC is not offering extensions beyond the stated date so that we can meet legislative
deadlines for our report.
We do not offer plans in a county, what do we do?
Please enter “N/A” in any boxes where you do not offer coverage. If you offer coverage but have
no active policies during the data call time period please enter “0”.
What is “Coverage A”?
Per the NAIC: “Coverage A provides coverage for a house and its contents, as well as any
structures attached to the premises, such as a garage or deck.”
What does “capacity” mean?
Capacity means the total exposure or maximum loss covered under a particular policy for a
single event within the noted parameters.
2017 Earthquake Data Call Report
35
What is “FIPS Code” in column B?
FIPS codes are numeric codes used by the federal government to represent county names. OIC
uses them to ensure that submitted data is correctly coded in our system. The entered codes
represent the counties listed in the corresponding row in column A.
Column C asks for the dollar value of Commercial Properties insured. Our
company does not capture replacement value, only Total Insured Value.
What do we do?
Please enter Total Insured Value here instead. Exclude any additional coverages beyond
structure/contents where possible.
Can I group several companies together when I submit?
No. Please submit a copy of the data call spreadsheet for each company with a NAIC company
number.
Where do I put my company name on this form?
Please include your company name and NAIC company number in the name of the file like
shown below for fictional company ABC Insurance (NAIC #12345):
“ABC Insurance 12345 EQ Data Call.xls”
We write a mix of earthquake policies and traditional all-perils policies in
the state of Washington. How do we enter our data?
Please make sure to answer questions 1-7 and indicate how you offer this coverage in question
3. In the residential and commercial tabs please count earthquake only polices in column D and
traditional all-perils only polices in column E. Traditional all-perils policies with earthquake
coverage should be counted in columns D and E. Column C should reflect the sum of maximum
exposure for each policy form a single risk. Do not double count exposure from policies with all-
perils and earthquake coverage.
We do not track county as part of our policy information. How do we
report?
If you retain the property address you may utilize the US Census geocoder web-app to derive
the county information for each property (individual or in batches of up to 1000 addresses). The
tool can be accessed at the following web address:
https://www.census.gov/geo/maps-data/data/geocoder.html
2017 Earthquake Data Call Report
36
Appendix C
Below is the email and data call instructions that were sent out to insurers for the Washington state
Office of the Insurance Commissioner’s 2017 earthquake data call.
Sent: Sept. 15, 2017 at 10:33 a.m.
Good morning,
By this email and the attached documents, the Office of the Insurance Commissioner (OIC) is calling for
data with the purpose of determining the current utilization rate of residential and commercial
earthquake insurance in the state of Washington.
This data call is being issued to companies authorized to do business in Washington state under the
OIC’s broad investigatory authority, see RCW 48.02.060(3)(c). We are also requesting responses from
surplus line companies doing business in Washington. We very much appreciate the assistance of
domestic insurers and the Surplus Line Association of Washington who assisted in reviewing a draft of
this data call to improve its clarity and ensure greater accuracy in the submitted responses.
Attached is the data call spreadsheet, and a memorandum of guidance for the response. The
completed data call is due October 13, 2017. Please complete and submit the responses in the
attached spreadsheet to: DataCal[email protected]ov. Questions regarding the purpose and use of data call
may be directed to Stacy Middleton at stacym@oic.wa.gov. Technical questions regarding responses
on the spreadsheet may be directed to Micah Sanders at micahs@oic.wa.gov.
Thank you,
AnnaLisa Gellermann
Deputy Insurance Commissioner of Policy and Legislative Affairs
Washington State Office of the Insurance Commissioner
PO Box 40255 Olympia WA 98504-0255
360.725-7037
annalisag@oic.wa.gov
Protecting Insurance Consumers
www.insurance.wa.gov | twitter.com/WA_OIC | wainsurance.blogspot.com | email/text alerts
2017 Earthquake Data Call Report
37
Memorandum
To:
Earthquake Datacall Insurer
From:
Micah Sanders, OIC Policy Division
Date:
9/7/17
Subject:
Instructions for completing the Earthquake Data call spreadsheet
This earthquake data call includes three specific parts located in tabs within an excel spreadsheet.
Please complete all three tabs of the spreadsheet even if your company does not offer earthquake,
residential, or commercial coverage. Please complete all GREY sections and check any applicable BOXES.
If your company does not offer coverage or you feel that a box does not apply to your company please
fill the applicable spaces with a “NA” to indicate that you do not offer coverage. Entering a “0” will be
interpreted as your company does offer coverage but currently has no enrollments.
Completing the “Questions” tab
1) Please complete all questions for both residential and commercial lines. If your company does
not offer coverage for one of the two lines enter “NA.”
2) Please enter “NA” in either the “$” or “%” boxes if your company does not offer both a total
dollar cap and percentage cap on policy value or deductible.
3) If your company offers property coverage for some perils but no coverage for earthquake
damage you may skip questions 4-7 on the “Questions” tab.
Completing the “Residential” and “Commercial” tabs
Column C: Please enter the total replacement dollar value of structures and contents, rounded
to the nearest thousand dollars for covered properties located in the indicated Washington
county. This value should represent the total maximum exposure by county, not the average
property exposure. Earthquake coverage provided by a secondary party should not be included.
Column D: Please enter the total number of properties in the indicated county that include
earthquake coverage in the form of package, fire, allied lines, commercial multi-peril (non-
liability portion), DIC, or mono-line earthquake coverage. Entered values must be non-rounded,
whole numbers.
Column E: Please enter the total number of properties in the indicated county that covers a
building to at least 50% of the replacement cost. Count one policy with multiple buildings as a
single policy. For properties where multiple individuals policies to cover the structure, count all
policies together as one policy covering the structure.
Definitions
Residential policies: owner occupied structures where the insured makes their residence. This
includes second homes and vacation houses that are not covered for rental.
Commercial policies: non-owner occupied structures where the insured is an individual, business,
or other entity. Generally means insurance pertaining to a business, profession, occupation,
2017 Earthquake Data Call Report
38
nonprofit organization, or public entity for the lines of property & casualty insurance. This
includes, but is not limited to, business locations, rental units, commercial properties, and
agricultural lands.
Replacement value: The total value of structures and contents insured on one property/policy.
This is effectively the total exposure from property loss, excluding medical, loss of use benefits,
legal, or other expenses.
Earthquake Coverage: Coverage for earthquake induced losses in the form of package, fire,
allied lines, commercial multi-peril (non-liability portion), DIC, or mono-line earthquake
coverage.
Questions
If you have any questions regarding how to complete this spreadsheet please contact me at the address
below.
Micah Sanders
Economic Policy Analyst
Washington OIC
MicahS@oic.wa.gov
2017 Earthquake Data Call Report
39
Appendix D
Companies from whom data was requested, which responded
Company Name NAIC
Code
Admitted vs Non-admitted
Ace American Insurance Company
22667
Admitted
AIX Specialty Insurance Company
12833
Non-admitted
Allianz Global Risk US Insurance Company
35300
Admitted
Allied Property & Casualty Insurance Company
42579
Admitted
Allied World Assurance Company Inc.
19489
Non-admitted
Allstate Insurance Company
19232
Admitted
American Automobile Insurance Company
21849
Admitted
American Family Mutual Insurance Company., S.I.
19275
Admitted
American Guar & Liability Insurance
26247
Admitted
American Modern Home Insurance Company
23469
Admitted
Aspen Specialty Insurance Company
10717
Non-admitted
AXIS Insurance Company
37273
Admitted
AXIS Surplus Insurance Company
26620
Non-admitted
Burlington Insurance Company, The
23620
Non-admitted
Country Mutual Insurance Company
20990
Admitted
Crestbrook Insurance Company
18961
Admitted
Depositors Insurance Company
42587
Admitted
Endurance American Specialty Insurance Company
41718
Non-admitted
EVANSTON INSURANCE COMPANY
35378
Non-admitted
Farmers Insurance Company of Washington
21644
Admitted
Federated Mutual Insurance Company
13935
Admitted
First Specialty Insurance Corporation
34916
Non-admitted
Foremost Insurance Company Grand Rapids, MI
11185
Admitted
Foremost Property & Casualty Insurance Company
11800
Admitted
General Security Indemnity Company of Arizona
20559
Non-admitted
2017 Earthquake Data Call Report
40
Company Name NAIC
Code
Admitted vs Non-admitted
Golden Bear Insurance Company
39861
Non-admitted
Grange Insurance Association
22101
Non-admitted
Great Northern Insurance Company
20303
Admitted
Houston Casualty Company
42374
Non-admitted
HSB Specialty Insurance Company
14438
Non-admitted
Indian Harbor Insurance Company
36940
Non-admitted
Insurance Company of the West
27847
Admitted
Ironshore Specialty Insurance Company
25445
Non-admitted
JAMES RIVER INSURANCE COMPANY
12203
Non-admitted
Kinsale Insurance Company
38920
Non-admitted
Lexington Insurance Company
19437
Non-admitted
Liberty Mutual Fire Insurance Company
23035
Admitted
Liberty Surplus Insurance Corporation
10725
Non-admitted
Maxum Indemnity Company
26743
Non-admitted
Mt. Hawley Insurance Company
37974
Non-admitted
Mutual of Enumclaw Insurance Company
14761
Admitted
Nationwide Mutual Fire Insurance Company
23779
Admitted
Pacific Indemnity Company
20346
Admitted
Palomar Specialty Insurance Company
20338
Admitted
Princeton Excess & Surplus Lines Insurance Company
10786
Non-admitted
QBE Insurance Corporation
39217
Admitted
QBE Specialty Insurance Company
11515
Non-admitted
Rockhill Insurance Company
28053
Non-admitted
Safeco Insurance Company of America
24740
Admitted
Safeco Insurance Company Of IL
39012
Admitted
Starr Surplus Lines Insurance Company
13604
Non-admitted
State Farm Fire & Casualty Company
25143
Admitted
Steadfast Insurance Company
26387
Non-admitted
Travelers Excess and Surplus Lines Company
29696
Non-admitted
2017 Earthquake Data Call Report
41
Company Name NAIC
Code
Admitted vs Non-admitted
Travelers Indemnity Company
25658
Admitted
Travelers Property Casualty Company of America
25674
Admitted
Unigard Insurance Company
25747
Admitted
United National Insurance Company
13064
Non-admitted
United Specialty Insurance Company
12537
Non-admitted
Vigilant Insurance Company
20397
Admitted
Westchester Fire Insurance Company
10030
Admitted
Westport Insurance Corporation
39845
Admitted
XL Insurance American Inc.
24554
Admitted
