RMS study reveals mega-tsunamis are no “black swan event”

by Artemis on March 19, 2015

Four years after the huge earthquake and tsunami devastated Tohoku, Japan, a new study has identified over 20 global subduction zones with the potential to produce an event of similar scale.

Leading international disaster risk management firm, RMS, produced the new study, “Coastlines at Risk of Giant Earthquakes & Their Mega-Tsunamis,” which aims to highlight the potential risks from the underestimated threat of mega-tsunamis.

“Future mega-tsunamis should no longer be considered black swan events, as we now know where these events can occur.

“While these events have very low occurrence rates, communities and businesses on the coastlines at frontline risk of these events should assess the risk accordingly,” advised Robert Muir-Wood, Chief Research Officer (CRO) at RMS.

Major earthquakes and resulting tsunamis that took place in Sumatra during 2004, central Chile in 2010 and Tohoku, Japan 2011, caused combined economic losses of roughly $250 billion, claiming an estimated 300,000 lives.

And it’s likely that should an event of similar scale happen in the future the costs would be considerably higher, as an increasing number of people are choosing to reside on the coast and global asset and property values spike.

In fact, Artemis recently discussed a study conducted by the United Nations (UN) which claimed that by the year 2050 an increasing proportion of the world’s population will reside in regions exposed to natural perils.

A lack of education on the severity and frequency of such catastrophes also contributes to the growing associated losses, particularly in developing regions of the globe where insurance penetration levels are often dangerously low.

“Many people are completely unaware they live in direct range of a potentially catastrophic tsunami,” noted Muir-Wood.

RMS conducted its research with the use of its recently launched ‘RMS Global Tsunami Scenario Catalog,’ a comprehensive platform, and world first, which offers a detailed view of global tsunami risks, reported at the time by Artemis.

Through its tsunami risks tool RMS explored all subduction zones across the earth that has the capacity to produce magnitude 9.0 earthquakes, whether live, dormant or inactive.

“While the Cyprus Arc subduction zone and Puerto Rico Trench, among others, are dormant, RMS analysis reveals they are capable of generating tsunami waves similar in scale to those produced along the Japan Trench in 2011, and with it unprecedented devastation,” explained Muir-Wood.

Since the Tohoku earthquake and tsunami efforts to better understand the perils potential severity and frequency has accelerated. Studies like RMS’ and advanced catastrophe modelling tools go a long way to ensuring the impact of such events is kept to a minimal.

And this is especially important in the ILS and cat bond sector, where many earthquake exposed reinsurance or retrocessional covers also cover losses from tidal wave or tsunami’s. While tsunami’s are generally thought to be a low contributor to any ILS deals expected losses, it is important to be aware just how big a threat these events can be.

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