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Catastrophe
Friday, February 1, 2002
Could be...

Research funded by Hannover Reinsurance Group Africa and conducted by Dr Andrzej Kijko and Mr Paul Retief of the Council for Geoscience suggests that floods and droughts are not the only natural catastrophes facing South Africa. They say that the risk posed by earthquakes should be seriously considered as well.

Nicholas Davies, statistical analyst at Hannover Re in Johannesburg says, “The research was conducted as we felt that it was time for a comprehensive scientific assessment of South Africa’s seismic risk. Generally speaking, people are unfamiliar with the risks that earthquakes can pose.” He points out that if an insurance company undercharges for the potential risk of damage caused by seismic activity, or fails to reserve appropriately, it might not be able to meet all its claims.
“The risk that earthquakes pose is very real in South Africa, especially in the light of increased mining activity. If the Ceres earthquake had to take place today, for example, the total estimated losses would have exceeded R3 billion and the estimated insurance loss would certainly have exceeded R1, 3 billion.”
The research confirmed that the seismic risk in Natal is also higher than generally believed. Damage to buildings due to earthquakes can be expected approximately every 40 years in central Natal.


The Western Cape is another area of concern, with an annual probability exceeding 20% that an event of intensity at least ‘V’ will occur. Intensity ‘V’ events often result in some degree of damage to some buildings. The intensity of earthquakes can be measured by the Modified Mercalli Scale on a range from ‘I’ (very mild, and you probably wouldn’t even feel it) to ‘X’ (total destruction).
Higher intensity events with return periods as low as 130 years (intensity ‘VII’) could cause the partial collapse of many buildings. Due to natural forces, there is the possibility of damage to buildings occurring, on average, every 12 years in the city of Cape Town, for instance. Mining related seismic activity occurs regularly in the Johannesburg West Rand areas, and potentially destructive events of intensity ‘V’ are expected to occur on average every nine years. Events of intensity ‘VI’, which will result in substantial building damage, are expected to take place every 40 years in the Johannesburg area.
“It is clear that mining poses by far and away the greatest risk. Plans are afoot at the moment to begin ultra deep mining near Carltonville, and estimates suggest that an earthquake of magnitude 5,5 or greater can be expected as a result. This means that significant damage could take place. Indeed around 45% of buildings in Johannesburg city could experience a mean damage ratio of 5%,” adds Mr Davies. “Because of the variability in the intensity possible, the damage could be even greater, with damage of 5% to 80% of Johannesburg city buildings.”
© Datawrite Publishing Limited 2002 — ® Insurance Times & Investments
 

Copyright © Insurance Times and Investments® Vol:15.1 1st February, 2002
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