Comparing earthquake insurance programmes: how would Japan and California have fared after the 2010-11 earthquakes in New Zealand?

Earthquakes are insured in high-risk high-income countries only if the public sector is involved. Prototypical examples are the insurance schemes in California (United States), Japan, and New Zealand, but each is structured differently. This paper examines these variations using a concrete case study: the sequence of earthquakes in Christchurch, New Zealand, in 2010–11—the most heavily insured seismic event in history. It assesses what would have been the outcome had the Christchurch insurance system been different, focusing on the California Earthquake Authority (CEA) programme and Japan Earthquake Reinsurance (JER). Overall, the aggregate cost of the earthquake to the New Zealand public insurer (Earthquake Commission) was USD 6.2 billion. If a similar-sized disaster had occurred in Japan and California, homeowners would have received around USD 1.6 billion and USD 0.7 billion, respectively. This paper describes the distributive and spatial patterns of these scenarios and discusses some key policy questions that emerge from this comparison.