Irvine, Calif.

CoreLogic Examines Financial Implications of the HayWired Earthquake Scenario


—An Insurance Analysis of the Series of Earthquakes that Could Occur Along the Hayward Fault—

CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released “Financial Implications of the HayWired Scenario.” This report theorizes the financial impact of the HayWired earthquake scenario. The analysis by CoreLogic examines the potential damage and insured losses if this hypothetical scenario, as defined by the United States Geological Survey (USGS), were to occur, including the effects of construction, property valuations, buy-rates, incremental damage resulting from aftershocks and hours clauses for insurance conditions.

The Hayward fault is one of the most dangerous faults in the U.S. It is located beneath the densely populated and economically vital communities of the San Francisco East Bay and represents a clear and present danger of hosting a catastrophic earthquake. The HayWired earthquake scenario is comprised of a series of reports from the USGS and a coalition of multi-disciplined contributors describing a hypothetical magnitude 7.0 earthquake along the Hayward fault followed by 16 aftershocks ranging in magnitude from 5.0 to 6.4.

Should this hypothetical scenario occur, CoreLogic found that more than 1.1 million homes are likely to sustain visible damage, with a smaller number expected to be functionally impaired as a result of the main earthquake and subsequent aftershocks. The total damage to private property for the entire scenario is estimated to be $170 billion, with only a small fraction of damages insured. Of this small fraction, insurance payments to property owners are estimated to be approximately $30 billion, less than 20 percent of the overall damage, primarily due to the low purchase rate of earthquake insurance. The $140 billion financing shortfall ($170 billion less $30 billion in insurance) presents a real risk to effective regional recovery. The potential for systemic impacts triggered by the lack of insurance is noted as particular concern as a significant portion of the property damaged by the earthquake serves as collateral for property mortgages.

The estimated financial impact of the main shock, as well as the effects of subsequent aftershocks, is as follows:

“The HayWired scenario is not a prediction of events to come, but it is a realistic portrayal of a series of earthquakes that could credibly occur along the Hayward fault,” said Tom Larsen, principal, industry solutions for CoreLogic. “Our analysis evaluates the interaction between the physical aftermath of the events, with earthquakes and aftershocks occurring over time, and the financial world of insurance policies. Assessing that interaction can help determine how such a catastrophic event, in conjunction with the low penetration rate of residential and commercial earthquake insurance, can have significant and long-lasting damage on the people and economy of the region.”

“The USGS and key industry leaders have worked together to anticipate the impacts of a hypothetical magnitude 7.0 earthquake on the Hayward fault, before it happens, so that people can use the latest science as they work to get even better prepared," said Dr. Ken Hudnut, USGS Science Advisor for Risk Reduction and one of the lead authors of the HayWired Scenario Report.

“With a better understanding and a practical planning scenario for the effects of an earthquake, we can begin to rethink how we plan for and respond to these disasters and thus improve our ability to recover,” said Larsen.

To learn more about the CoreLogic special report, including key sensitivities to consider when analyzing the financial impact of earthquakes, please see here.

To learn more about the HayWired Scenario, please visit https://outsmartdisaster.com/.

Source: CoreLogic

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About CoreLogic

CoreLogic (NYSE: CLGX) is a leading global property information, analytics and data-enabled solutions provider. The company’s combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years and providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. For more information, please visit www.corelogic.com.

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