The strongest earthquake to hit the Los Angeles area of California since the 1994 Northridge event has struck the region in the past hour. The magnitude 4.4 quake is a reminder of the threat this peril poses to the reinsurance and catastrophe bond market.
The U.S. Geological Survey recorded the 4.4 magnitude (initially reported as M4.7) quake just 9km from the Westwood area of Los Angeles. The earthquake struck at 06:25 local time, delivering a jolt which woke up may in the region.
There are no reports of damage so far, as you would expect from a 4.4 earthquake which is typically not strong enough to cause any major damage or disruption, however it will remind the reinsurance and cat bond market that California earthquakes are a real threat.
Dr Lucy Jones of the USGS told CBS News that this is the largest earthquake to be felt in the Los Angeles area since the 1994 Northridge event. Dr Jones said that the region could face aftershocks throughout the day and that there is a 5% chance that another strong quake could strike the area within the next three days.
The catastrophe bond market has significant exposure to California earthquakes, with it being perhaps the largest single geographic peril in the market after U.S. hurricane risk. There are a number of cat bonds which are exposed to pure California quake risk (such as the $300m Embarcadero Re Ltd. 2012-2 and the $150m Embarcadero Re Ltd. 2012-1), many more which have exposure to earthquake across the U.S. and even a cat bond exposed to workers compensation claims resulting from an earthquake in California (Golden State Re Ltd.).
A magnitude 4.4 earthquake is of course no threat to reinsurers or catastrophe bonds, but given the concentrated exposure in the region any earthquake activity is a concern and will be watched closely.
You can see details of catastrophe bonds with exposure to California earthquake risks in the Artemis Deal Directory.