April 30, 2024

On April 18, 1906, San Francisco experienced one of the largest earthquakes in insurance history in terms of economic damage. The 7.9 magnitude earthquake lasted only about a minute, but caused significant damage and fires, destroying about 80% of the city's buildings. It was the fires that raged in the city 4 four days that ultimately caused the major financial losses.

The event was a shock not only for national insurers, but also, for the first time in history, to the global insurance industry with long-term effects. The total loss amounted to nearly 191 mln. USD, roughly 6.1 bln. USD in today's prices. More than a hundred national insurers participated in the recovery, as well as dozens of international reinsurers, including Lloyd's of London, Swiss Re and Munich Re.

It is noteworthy that most San Francisco residents had property insurance policies against fire with the condition that the insurer was exempt from liability in case of damage caused by natural disasters. And since the cause of the fire was an earthquake, the insurance companies, from a legal point of view, had the rights to refuse to pay an indemnification. Nevertheless, a significant portion of the insured losses were reimbursed by the insurance companies. This was preceded not only by a struggle between insureds and insurers (reinsurers), but also by pure considerations of insurers (reinsurers) to keep for themselves the rapidly growing and profitable insurance market of the USA.