On Shaky Ground

In light of the continuing financial, environmental and other impacts from the devastating Tōhoku earthquake and tsunami that struck Japan in March, the lead article in today's real estate supplement to the local newspaper discussed the growing concern that the great majority of buildings in Switzerland would not withstand a strong earthquake should anything similar occur here.

From a global perspective, the risk of a catastrophic earthquake in Switzerland is considered quite moderate.  It is not a comparatively major trouble spot.  And whatever risk does exist varies largely among the regions.  For example, the risk is particularly high in Valais, Basel, Central Switzerland, Engadine and Saint-Galler-Rheinthal.  To drive this point home, the article listed the nine most powerful earthquakes recorded in the history of the Swiss Confederation as follows:

              Churwalden (Grisons): 3 September 1295
              Basel (Basel): 18 October 1356
              Ardon (Valais): April 1524
              Aigle (Vaud): 11 March 1584
              Central Switzerland: 18 September 1601
              Brigue-Naters (Valais): 9 December 1755
              Altdorf (Uri): 10 September 1774
              Viège, aka Visp (Valais): 25 July 1855
              Sierre (Valais):  25 January 1946

All of these earthquakes were located quite naturally in mountainous areas.  Fortunately for me, the area around Lake Geneva is not a high-risk earthquake area.  Of course, as we have seen from the earthquake in Japan, one does not actually have to be in an earthquake area to have one's life changed by it.

One concern is that earthquake insurance is not required in Switzerland, even though coverage is available through Swiss Re for those who wish to obtain it and costs about CHF 100 per CHF 500,000 worth of coverage.  Yet, of all possible natural disasters, the risk of earthquakes ranks highest here.  Some cantons, such as Vaud where I live, require that flood and fire coverage be purchased for real estate holdings, in addition to regular comprehensive insurance.  The cost is reasonable.  Because my own property is located very close to a major lake floodplain, I believe that the flood coverage especially makes sense.

In 2003, there was a parliamentary initiative at the Federal level to strengthen protective coverage for natural disasters generally, but the political right and the cantons themselves opposed it and so it never came to anything.  In 2005, private insurance companies and cantonal insurers actually agreed on a similar proposal.  Once again, the political right, this time allied with the association of property managers, defeated it.  So today, it's up to individual owners.

The concern is that Swiss society, like that of any other industrialized society, has become more vulnerable in modern times.  It is not only individual buildings and homes that would be affected but also major infrastructures such as telecommunications and electrical systems, food provisioning and water systems.  In such a context, the consequences of a major earthquake in Switzerland could be terrible.

According to one estimate from Swiss Re, an earthquake on the scale of that in the region of Basel in 1356, with an estimated magnitude of 6.5, could cause damages amounting to CHF 80 billion, three-quarters of which would result from damages to and loss of real estate.  To that amount, one would still need to add another CHF 20 billion for financial consequences resulting from infrastructure destruction and loss of productivity.  Apart from the economic impact, the human toll would be devastating, with thousands dead or gravely injured and hundreds left homeless.

Sobering thoughts indeed.