Download Earthquake Coverage for Midwestern Community Banks Along the

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).