Loma Prieta earthquake: Is California more vulnerable than 1989?

On Tuesday, October 17, 1989, the Mw 6.9 Loma Prieta earthquake struck along an oblique-reverse fault, possibly connected to the San Andreas Fault system, near Santa Cruz County, California-about 50 miles (80 kilometers) from San Francisco and Oakland.

The earthquake's intense ground shaking, combined with the soft Bay Area soils, led to widespread liquefaction, particularly in San Francisco's Marina District (Niekerken, 2017).

The quake caused significant damage to buildings, infrastructure, and businesses, resulting in 63 deaths and over 3,700 injuries, mainly due to the collapse of the Nimitz Freeway and damage to the San Francisco-Oakland Bay Bridge.

Known as the 'World Series Earthquake' because it occurred during Game Three of the Major League Baseball World Series between the San Francisco Giants and Oakland Athletics, it generated an estimated US$6 billion in economic losses and over US$900 million in insured losses at the time (Stoffer, 2005; Steinbrugge & Roth, 1994).

Five years ago, Moody's RMS published a study using the Moody's RMS® United States Earthquake Model (now on the Moody's Intelligent Risk Platform™) to explore 'what-if' scenarios (Figure 1) and assess potential losses if a similar event occurred in today's context.

Now, thirty-five years after Loma Prieta-and following a global pandemic-we revisit these scenarios to evaluate their projected impact on the Bay Area, with the region's economy ranking among the world's top twenty (Wunderman, 2019).

Improvements in Earthquake Resilience

The 1989 Loma Prieta earthquake exposed critical weaknesses in the Bay Area's infrastructure and emergency preparedness, sparking a wave of resilience efforts (Brocher et al., 2018; Joint Legislative Committee on Emergency Management, 2024).

In the years that followed, major retrofitting projects were undertaken on vital structures such as the San Francisco-Oakland Bay Bridge, the Golden Gate Bridge, and the Hetch Hetchy Water System to withstand future seismic events. Many older buildings, particularly those with soft-story designs and unreinforced masonry, were also upgraded to meet modern seismic standards (SFDBI, 2013).

Public preparedness programs have become a key priority, with initiatives encouraging residents to secure furniture, assemble emergency kits, and participate in annual earthquake drills like the Great California ShakeOut.

The ShakeAlert system, California's earthquake early warning tool, provides seconds of advance notice before shaking starts, enabling agencies to halt trains, pause surgeries, and initiate safety measures (ABAG, 2016; Given et al., 2018; McGuire et al., 2021).

On the policy front, stricter building codes were introduced, including mandatory retrofits for high-risk structures. Land-use planning now incorporates seismic hazard considerations, such as liquefaction and landslide risks, guiding development decisions to limit exposure in vulnerable areas. For instance, regulations now prohibit the construction of soft-story structures in high seismic risk zones (City of Oakland, 2019).

However, challenges remain. Retrofitting costs can be prohibitive, leaving some buildings without necessary upgrades. Meanwhile, the Bay Area's growing population and urban expansion continue to put pressure on land use, increasing potential exposure to seismic hazards.

Evolution of Exposure: COVID-19 Impact and Global Inflation

Since 1989, the San Francisco Bay Area has experienced more than a 35 percent population increase, adding nearly two million residents and concentrating people and assets in high-risk seismic zones such as San Francisco, Oakland, and San Jose.

Rising construction costs-more than doubling since 1989 (RSMeans, 2019)-have driven up replacement values, increasing the region's economic exposure. If an earthquake on the scale of the 1989 Loma Prieta event were to occur today, six of the world's ten largest tech companies would experience severe shaking (Modified Mercalli Index greater than 6).

Beyond immediate damage, the ripple effects would extend globally, impacting tech and logistics industries due to interconnected supply chains. The Bay Area's economic exposure now extends beyond physical asset losses, with business interruption risks potentially significant for both national and global economies.

COVID-19 has further reshaped the region's landscape, triggering migration to less expensive suburban areas and leaving downtown office spaces underutilized as remote work has become more common (Leonard, 2024).

Consequently, economic exposure has shifted from high-value urban office spaces to suburban regions, where new housing developments are often built on lands prone to liquefaction and landslides. Inflation and rising property values, driven in part by the pandemic, have further intensified economic exposure (C.A.R., 2022).

The tech industry's continued growth in Silicon Valley has increased demand for office spaces and data centers, yet some developers have opted to cut costs on construction materials, potentially undermining seismic resilience.

Moreover, older neighborhoods featuring soft-story buildings continue to be at risk, as financial limitations have hindered retrofitting initiatives in certain areas, resulting in pockets of vulnerability, particularly in lower-income communities (Gutierrez, 2023).

Despite the growth in population and asset values, earthquake insurance uptake has declined. Around 25 percent of California's homes had earthquake coverage in 1989, peaking at over 30 percent after the 1994 Northridge event.

However, as memories of these earthquakes fade, only about 10 percent of homes now maintain such coverage (Marshall, 2018), leading to a substantial insurance protection gap.

This decline in coverage amplifies the potential financial impact of a major earthquake, leaving many residents and businesses under-protected as seismic risks continue to evolve.

Insurance Gap in California

To assess the current risk landscape if a Loma Prieta-scale earthquake struck today, the Moody's RMS® United States Earthquake Model was used to estimate potential losses, updating the analysis from the previous study with the same 'what-if' scenarios.

These scenarios target major urban centers near critical faults, including the San Andreas, Hayward, Rodgers Creek, Silver Creek, and Monte Vista-Shannon faults, with a focus on densely populated and economically important areas (Figure 1). The model accounts for modern building stock, rising construction costs, increased earthquake insurance uptake, and improved building resilience since 1989.

Among the scenarios, the Northeast Bay and East Bay events, both involving the Hayward Fault, show the highest probabilities due to the fault's late stage in the seismic cycle.

Liquefaction could significantly amplify losses in the Northeast Bay scenario (Figure 2), while the East Bay event is likely to produce the highest number of fatalities. In the Peninsula scenario, damage would concentrate in San Mateo County, impacting high-value areas close to tech giants like Facebook and Oracle.

The South Bay scenario, meanwhile, would heavily impact San Jose, potentially causing major business interruptions for leading tech firms located in the region.

Figures 2 and 3 reveal striking gaps between economic and insured losses across these scenarios. Over 65 percent of potential losses in the Bay Area remain uninsured, leaving a large insurance gap.

Commercial and industrial properties have notably low insurance take-up rates (15-20 percent and 3-5 percent, respectively), and residential earthquake coverage remains around just 10-11 percent, consistently with previous estimates (Marshall, 2018).

This is far below earthquake insurance rates in similarly high-risk areas like Japan. The California Earthquake Authority (CEA), one of the world's largest residential earthquake insurers, aims to address this gap by promoting resilience through initiatives like the Earthquake Brace and Bolt Program, which offers grants for seismic retrofits.

In collaboration with Moody's RMS, the CEA has demonstrated how retrofitting can reduce annual losses, making California's housing market more resilient against earthquake risks.