RMS (Risk Management Solutions) is a small US company that specializes in catastrophe models for the insurance industry. These models cover natural perils such as earthquakes, hurricanes, and other windstorms. In 2002 RMS produced a report entitled Accessing Workers Comp Risk from Earthquakes (updated version here). What if the 1906 Great San Francisco Earthquake occurred today. The point of this report was to draw the attention of catastrophe risk managers in the insurance industry to the potentially high costs of workers compensation in large catastrophes. It also makes fairly sobering reading for people who work in San Francisco.
RMS assumed the replay of the Great Quake would occur at peak office occupancy hours; mid-afternoon, mid-week. The Diagram below shows the relative ground shaking used to calculate potential losses
The following table shows the potential losses in workers compensation from a repeat of the 1906 earthquake compared to equivalent losses from the World Trade Center Attack.
| Workers Compensation | 1906 San Francisco Earthquake Repeat | World Trade Center Attack | |
|---|---|---|---|
| Expected | 90% Confidence | ||
| Injuries | 37,000 | 78,000 | Unknown |
| Deaths | 3,000 | 5,000 | 2,700 |
| Insured Loss | $3.4B | $7.1B | $2.5B – $5.0B |