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Earthquake Coverage for Midwestern Community Banks Along the New Madrid Fault Line Patti Tobin FI Specialist CBIS/Nicoud Insurance Springfield, IL Seasoned community bankers in Southern Illinois and Missouri, especially the ones most involved in understanding their bank’s property and casualty policies, have likely heard of New Madrid. More than 200 years ago, four of the largest earthquakes in our country’s history took place in the span of a few months, all radiating from the New Madrid fault line. In general terms, the fault line extends to the south from Cairo, Illinois, and reaches into Kentucky, Tennessee, Arkansas and Indiana. But recent data suggests Illinois and Missouri may be most exposed by the 150-mile long fault line. Last July, a study released by the U.S. Geological Survey showed that earthquake activity in the Midwest and East Coast quintupled between 2011 and 2013. About 100 were registered in that period, up from an average of 20 quakes a year for the majority of the last century. Most of those quakes were relatively quiet. Scientists did not make firm predictions with the release of last year’s report, but what they did say was more than enough to focus insurers’ attention. “We know the hazard has increased for small and moderate size earthquakes. We don’t know as well how much the hazard has increased for large earthquakes. Our suspicion is it has but we are working on understanding this,” said William Ellsworth, a scientist with the USGS, as reported in the Wall Street Journal. Non-government sanctioned scientists make predictions on the probability of future activity, typically based on the regularity of past activity. The last quake that registered above a six on the Richter Scale along the New Madrid Fault Line was more than 100 years ago. The USGS’s report is a highly scientific document, and does not exert a lot of energy predicting the next “big one.” But the bottom line that insurers took away from the report is that the chance of extensive damage to public and private infrastructure from New Madrid activity is more than previously thought, and certainly much more than the general public perceives. And that has affected how insurers write earthquake protection under community banks’ property and casualty policies. For those banks potentially affected by New Madrid activity, carriers are placing firm limits on earthquake protection, or some not providing at all. Excess coverage can be purchased, but policies are not getting cheaper. At Nicoud, we’re not in the doom’s day business. But the fact is that negotiating earthquake protection for community banks has been made a bit more complicated. Understanding your bank’s existing protections, and whether or not the most recent government data affects your bank, is ultimately imperative to assessing the quality of your property and casualty coverage. Let Nicoud take the lead in understanding if your bank is affected, and what further protections may exist. Please contact Patti Tobin (217) 414-4485, FI Specialist, CBIS/Nicoud Insurance. CBIS/Nicoud is a preferred service provider of Community BancService Corporation (CBSC).