A major earthquake hit California again

Calif. contractors finding new ways to mitigate earthquake risks,

“Should a major earthquake hit California again, and it is in any of the most populated cities, the damages would be catastrophic,” says Steven Steckler, president of Sentry Claims Group.

But experts say retrofits are also just as important as incorporating new design concepts to mitigate the seismic activity.

In 2021 alone, 15 earthquakes of a magnitude of 6 or higher have struck our planet, from offshore Alaska to August’s devastating earthquake in Haiti. In California, builders are finding innovative methods to prevent disastrous losses from these often catastrophic events.

A recent project by McCarthy Building Companies and design architect NBBJ is the world’s first building to use base isolators atop springs to absorb ground motion during an earthquake. The newly completed Loma Linda University Medical Center is the largest hospital project in California by square footage and sits within close proximity to major earthquake faults. To ensure the 16-story medical center met California’s strict seismic standards, the firms placed the structure atop 126 base isolators, each weighing nearly 10 tons and designed to help keep the building as still as possible.

According to the California Department of Conservation, two to three earthquakes occur each year within the state that are large enough to cause moderate damage to building structures.

“Typically, seismic upgrades are performed on older buildings with higher potential damageability and stability issues,” Roy Anderson, vice president of seismic risk services at AEI Consultants, told PropertyCasualty.com sister site GlobeSt in a recent interview. That includes wood-frame (a.k.a. soft-story) properties with tuck-under parking, steel moment-resisting frame properties (pre-Northridge) constructed before 1997, non-ductile moment-resisting concrete frame buildings constructed before 1976, concrete tilt-up buildings constructed prior to the 1994 Northridge earthquake, pre-cast buildings and unreinforced masonry buildings constructed before 1934.

But incorporating new design concepts to mitigate seismic activity is just as important as retrofits, which have long been on the minds of California lawmakers.

“Should a major earthquake hit California again, and it is in any of the most populated cities, the damages would be catastrophic,” says Steven Steckler, president of Sentry Claims Group. “The residents and their insurance companies would be overwhelmed with the sheer volume and depth of claims. Also, I would be remiss if I did not reference the cost from displacement along with residential and commercial property damages, which would be historic due to the amount of people living and working in these affected areas.”

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Commercial P&C Insurance

Commercial Office Space Set for a Strong Comeback

The sustained increase in demand for office space across the nation since late 2022 suggests that the market has moved past its lowest point, according to insights from the real estate technology platform, VTS. Demand for office space began to rise in late 2022 and continued into early 2023. Since then, the office market has experienced a period of stability and growth, supported by favorable economic factors, indicating a market rebound. This conclusion is drawn from the VTS Office Demand Index (VODI), which tracks unique new tenant tour requests for office properties in key U.S. markets. The VODI serves as an early indicator of future office leasing activity. According to the index, demand for office space has grown consistently over the past 12 months, closing the second quarter with a 17% year-over-year increase and a 34% rise from the VODI’s lowest point in December 2022. A significant shift in office-based employment patterns further supports the belief that demand for office space has stabilized. After reaching its peak in August 2022, office-based employment declined by 3.9% in early 2024. However, this trend has since stabilized, and employment growth has remained steady. Additionally, a recent decrease in work-from-home rates has fueled the renewed demand for office space. “They say you can only recognize a market bottom after it has passed, and the office space market is no exception. Following what we now see as the bottom, the national demand has gradually increased, though it remains susceptible to economic challenges,” said Nick Romito, CEO of VTS. “However, the growth observed in VODI over the past 18 months, coupled with positive trends in the office-using workforce, suggests that the market has reset, and the worst is behind us.” It’s important to note that this national trend does not impact all local markets equally. Cities like Los Angeles and New York City have seen healthy growth in office space demand, while markets such as San Francisco and Washington, D.C., have experienced prolonged stagnation. In Los Angeles, office space demand surged in the second quarter, briefly surpassing pre-COVID levels, driven by an increase in the average size of office spaces sought by tenants. New York City followed a similar overall pattern, though with some softness in the second quarter. Conversely, San Francisco’s demand for office space remains unpredictable, largely due to its tech-focused workforce, which continues to favor remote work more than other industries. “Markets heavily dependent on the tech sector, like San Francisco and Seattle, are on a markedly different post-COVID recovery path compared to more diversified markets like Los Angeles and New York City. It may take some time before we see office demand in San Francisco and Seattle return to pre-COVID levels,” added Ryan Masiello, Chief Strategy Officer at VTS.

Cyber Liability

Global IT Outage Puts Business Interruption Insurance in the Spotlight

In July, a global IT outage had a significant impact on business interruption insurance policies, overshadowing the effects on cyber insurance coverages. “This incident wasn’t a result of a malicious attack, which is why typical cyber insurance policies may not have been activated,” explained Peter McMurtrie, a partner in West Monroe’s insurance sector, in an interview with PropertyCasualty360.com. “Where coverage was applicable, factors like deductible amounts, waiting periods, and coverage limits played a critical role in determining the extent of exposure,” McMurtrie noted. “Standard policies for small businesses were less likely to offer coverage, while more complex policies for mid-sized companies and Fortune 500 corporations may have included broader triggers for non-malicious outages caused by third-party software issues.” The outage was triggered by a software update on July 19, 2024, by cybersecurity firm CrowdStrike, which affected organizations worldwide using Microsoft Windows. This interruption had far-reaching consequences, including disrupting hospital systems, media outlets, financial institutions, delaying thousands of flights, and halting daily business operations. McMurtrie emphasized that while the initial impact of the outage was similar for both large and small businesses, the ability to recover operations and whether insurance covered the loss of business income varied. “Larger companies are more likely to have advanced disaster recovery plans that ensure service redundancy following unexpected outages,” he added. “Their insurance programs also tend to cover a wider range of incidents.” According to Microsoft, the CrowdStrike update error affected over 8.5 million Windows devices globally. The incident highlighted the interconnected nature of our global ecosystem, including cloud providers, software platforms, security services, and their clients. “It’s a stark reminder of the importance of prioritizing safe deployment and disaster recovery across the tech industry,” the company said in a blog post. McMurtrie pointed out that the outage’s widespread impact was largely due to its effect on organizations that are critical to societal infrastructure—sectors like agriculture, airlines, banking, energy, government, healthcare, manufacturing, and retail. “Insurance companies base their risk appetite on their ability to understand and price risks appropriately. This becomes increasingly challenging with emerging threats,” he said. “However, I anticipate that insurers will respond by clarifying policy language, refining risk selection criteria, and possibly developing new products specifically designed for this evolving exposure.”

A major earthquake hit California again