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face burdensome deductibles of as much as 15 percent of the value of the structure. Policies that
provide coverage for loss of income, alternative housing and other ancillary costs are frequently
considered to be prohibitively expensive. While earthquake insurance does not guard against death,
injury or property damage – only retrofits can do that – it can help during the recovery process and
should be made more affordable to protect the state’s ability to spring back from a major quake.

THE GOOD NEWS: RETROFITS PROTECT SOCIAL, ECONOMIC STABILITY

The State of California Seismic Safety Commission in
Typical L.A. Soft-Story 2000 prepared a report on lessons learned from major
quakes striking Turkey, Greece and Taiwan in 1999.
Retrofit Case Study Damage from the Turkey quake was shocking: with
more than 211,000 people displaced and forced to live
in tent cities for more than a year. “Each of these
Apartment Building Value:
events provides a reminder that major earthquakes can
$250,000 per unit
strike urban areas without notice and with devastating
Retrofit Cost: $7,500 per Unit impacts,” the report said. “These earthquakes provide
inescapable evidence that California must continue to
Cost/Value Ratio: .03 prepare for major seismic events to strike.”

The Structural Engineers Association of Southern
California agreed, stating, “Improved performance of our community’s and region’s built environment is
critically important to saving lives as well as important to protecting its economy, character and
xxxi
fabric.” Yet to date, there has been no broad-reaching private-sector policy enacted to enhance the
resiliency of California communities to withstand a major earthquake.

“Too many countries are playing Russian roulette when it comes to seismic risk,” Claire Berlinski wrote
in a Manhattan Institute commentary. “Seismic risk mitigation is the greatest urban policy challenge the
world confronts today. If you consider that too strong a claim, try to imagine another way in which bad
urban policy could kill a million people in 30 seconds.” xxxii

Cost Benefits to Building Owners

Researchers at Caltech recently determined that for every dollar spent in retrofitting soft-story
structures, property owners could expect to save up to seven dollars, and that study didn’t factor in loss
to contents, alternate living expenses or deaths and injuries – all of which would have significantly
increased the cost-to-benefit ratios. xxxiii

FEMA found similar cost benefits in a two-year analysis of seismic retrofit scenarios applied to a variety
of building types in locations throughout the United States. The study found high benefit-to-cost ratios
for California, including a scenario of a tilt-up warehouse building in Hayward. “In this example,” the
study found, “the benefit/cost ratio is about 10 without the value of life and about 12 with the value of
life. The benefit/cost analysis suggests that retrofit is strongly justified economically, even without
including the value of life.” xxxiv That return on investment was even higher for tilt-ups with a higher
occupancy, such as light industry, the study found.

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