Tsunami Insurance

How can you Insure against Tsunami?

(Tsunamis are rare "tidal waves" which in the freak conditions they occur, wreak havoc near the coast. They can occur anywhere there's land near to the ocean. Although uncommon, and associated with earthquakes, tsunamis cause so much destruction and death, that the insurance aspect needs to be considered)

With Insurance, the idea is that you pay a regular moderate premium on the basis that if the worst should happen, then the effect of the damage will be reversed, by the insurance coming to the rescue.

Insurance generally works quite well, and it is like gambling but the opposite way round. Instead of paying a small amount for a lottery ticket and giving yourself a small chance of winning a fortune, you are "buying off" some terrible disaster by paying a small premium such that when multiplied by the probability factor, you can be compensated. The amounts and risks have to make sense, and everyone has to make a profit.

For Tsunami Insurance to make sense, the risk needs to be assessed. What is the probability that you will be wiped-out by a tsunami? If that tragedy happened, what losses would you face? Multiplying the potential loss by the probability gives the effective basis of the premium, or "what the risk is worth".

To illustrate the general principle of insurance, if you have a Ming vase worth a million pounds and you want to insure it under a coconut tree overnight and there's a 10,000 to one chance it will be smashed, then the effective cost of the risk is (1,000,000 divided by 10,000) = 100 pounds. This is also the type of calculation to use for Tsunami Insurance. (Everyone's got to make a profit, so it seems fair to pay 200 pounds (for example) for the effective 100 pound risk).

The risk of death and destruction by tsunami is small, but it can be calculated by consideration of how many places are destroyed by tsunami on a yearly basis, and what the cost is. Note that with tsunamis, they do not strike just anywhere, and some places are much more at risk than others. If you live in a castle up a mountain inland, your chance of being got by a tsunami approximates to zero, or at least it's up there with the major asteroidals, bye-bye dinosaurs, and once every 65 million years. If you live on a beach on an island in the Maldives, (which has no elevation), your probability of destruction by tsunami can be calculated according to form. Form, as in following the horses. Tsunamis occur every few years somewhere in the world, and if you are where the tsunami comes in, then it could be your unlucky day. However, it's a quantifiable risk. It might be once in 100 years.

Of course the better placed you are, from a tsunami defence point of view, the lower the risk. More about this later.

Now here's another problem about Tsunami Insurance: As with Sentimental Value Insurance, it's sometimes impossible for the insurer to "pay out" properly. This has always been a problem with Life Insurance, where the insurance company can't really "pay out" by resurrecting you, and can only compensate your family by covering your income. However, as explained on the page about Sentimental Value Insurance, the fact that a type of insurance is unavailable doesn't change the fact that it is still required, and so it reverts to a situation of "The insurance companies won't insure me, so I'm going to have to be my own insurance company!".

There is an additional problem with Tsunami Insurance, which is this: Any multi-millionaire with a good eye for professional gambling is onto a good thing with accepting £200 from you to take an effective risk of 10,000:1 versus £1M (risk value £100), because on average, they are going to be in profit. However, with Tsunami Insurance, it's more like having hundreds of priceless antiques all at risk from one threat. If the disaster occurred, all of the claims would come in simultaneously, and therefore there are serious questions of risk-factor solvency. This type of problem, where all of the cases of risk are non-independent, even though they'd been assessed statistically as if they were independent, is one of the things that ruined various banks in the global recession previously known as the Credit Crunch, because the banks assumed that they'd be OK as they could repossess a house if the borrower didn't pay up. When all borrowers were smote by a single disaster (recession), the non-independency of the risks was revealed, and it was impractical to repossess all of the houses as they would not be saleable.

Also some of the more oldfashioned religious insurance companies don't like to insure against "Act of God", but the fact is that the Vatican has lightning rods on their roof, and so it suggests a pragmatic approach is more appropriate.

In a nonreligious understanding of risk factors, the things previously known as "Act of God" are ideal things for insurance, as the fear of them is bigger than the statistical risk factor. It would be like an insurance company insuring people against shark attack rather than refusing on account of fearing the wrath of Neptune.

Now back to the risks of tsunami, and how these can be estimated, guarded against, and reduced. This is regardless of whether any companies will insure you against tsunami. If you are your own insurance company, which is what you are if no-one offers you Tsunami Insurance, you need to be the underwriter of your risks, and therefore as with Sentimental Value Insurance, you need to do some thinking about the risks.

When assessing your tsunami risk, there's plenty of helpful (but tragic) historical documentary information which helps to build a basis for form, in a professional gambling sense.

The biggest factor has got to be: where you live. If you live close to the sea, especially an ocean, then your risk is very considerably higher than if you live at some altitude. When the Indian Ocean Tsunami 2004 occurred, some people in Vanuatu heard the earthquake and knew that meant a likely tsunami, so they went up a 400ft hill. That saved them. Being uphill, even 100ft above sea level, makes a vast amount of difference. Tsunamis are a terrible devastating force than can smash everything in their path, but they aren't very good at going uphill. It's like spotting an assassin hit-and-run driver coming at your driving a steamroller, you know that if they catch you then you will be destroyed spectacularly, but you can evade being flattened by dodging out of the way, going up a staircase, etc.

When you see the astonishing footage of the Banda Acheh tsunami in 2004, or the To-hoku earthquake and tsunami in 2011, or any other of the tsunami events during the ubiquitous personal photography era, you can see the places that take the damage are lowland. Right next to the sea is the area most at risk, along with flat land which is low-lying within a few miles of the sea.

Note that you don't have to live up a mountain to avoid tsunami risk. You need to check the lie-of-the-land to determine your risk. This is something to do when buying a property.

My own personal guideline is that you can avoid about 99% of the tsunami risk by being at least 120ft above sea level and a few hundred feet inland. Now that I've emigrated to a tax haven, I am keen to make sure my house has some elevation. I know it's 70ft higher than the river, and the river has got to be higher than the sea.

I also live quite near to a volcano and I have a similar set of personal guidelines to Volcano Insurance. The nearby volcano erupted twice in the last forty thousand years. I consider that is borderline. (see tax havens for references to these places). If it had been like Nevis (as in St Kitts and) which erupted 100,000 years ago, that would have been "safe" in my view. In contrast, places such as St Vincent which last erupted 2,000 years ago, "not safe". Montserrat has my sympathies.

When I tell people about tsunami risk, they say I am mad. This is true, I am mad, but that doesn't mean I'm wrong. They (the sane people) say "There's never been a tsunami here. These things only happen in far-away exotic places like you see on the news". It bothers me that someone who is sane can stand on a piece of ground less than 10ft above sea level in a place that's completely flat and only 10 miles from the sea and say there is no chance of a tsunami because there has never been any before. The correct way of phrasing it is "There's not been a tsunami YET".

* If you are at the seaside, and the sea has mysteriously "disappeared", don't take time to go around exploring the previously undersea region. Instead, taking no longer than 30 seconds to get photographic evidence of the astonishing scene, run away! Flee! Run to the hills. The sea will come back, and when it does, it will be a tsunami. It might be half an hour, but it could be less. I think it's worth the 30 seconds to capture the astonishing scene for posterity, but also any pictures of people you catch will be greatly appreciated by their bereaved friends and relatives, as these will be the last pictures of them.

* As with planning your escape route in a hotel in advance of fire, it's a good idea to plan your mode of running to the hills when near the coast. If there's a hill and you are able to climb it, you are not going to be on the tsunami death list.

* Tsunami warnings can come in, and you may get to hear about a tsunami a few minutes before it arrives or several hours before it arrives. Sometimes you can set up a "negative warning" system, where you've got something tuned in to Radio La Palma Cumbre Vieja Canarias (see http://en.wikipedia.org/wiki/Cumbre_Vieja ) so if the radio station goes silent, you know to watch for news of a tsunami. (Tsunamis travel at 500MPH across the sea, at a low elevation, and only turn into huge high devastating (but slower) shore impacts when they arrive in the shallows). So, you might have several hours' warning.

* You know when a tsunami will arrive, but you don't know what the height is going to be. This results in some "false alarms" but don't be put off.

* A tsunami is not just water. It's usually a mixture of water and debris, the smashed stuff all churned up in water, travelling along at about 15MPH. Victims that survive tend have have multiple cuts and bruises where they've been put through the detritus that's all been stirred up.

* Keep a stock of survivalist stuff, not just to survive the initial disaster, but to survive the problems after, especially in populated areas.

Also see Volcano Insurance