In this article, we discuss the growing trend of subsidence risk as well as the importance of raising risk awareness about the exposures associated with it.
The raising claims accumulation potential for the (re) insurance industry is not to be ignored.
Keeping loyal to our principle “underwriting curiosity” we came across with an increased trend of subsidence risks in many parts of the world and which we will cover in this article.
“In 1976 the UK experience an extraordinary dry summer, in consequence of which many houses in the South East of England suffered damage due to the shrinking of the clay soil. At that time, it was felt that with the return of the winter rain, the clay would expand and cracks in houses would close up again. Unfortunately, in a number of cases, the expansion of the clay did not occur where the subsidence of the house had taken place and in consequence, further damage was done by “heave”. A very large volume of claims resulted from the dry summer and because rectifying the damage is a skilled task, the claims proved to be very expensive as well as requiring a very lengthy time to complete the repairs. During recent years the amount of rain has been below average, and it is likely that Insurers will once again have to face another round of heavy claims from this peril.”
We first read the captioned extract from “Fire Insurance Theory & Practice by Edwin Gamlen and Harold Francis” back in 1993. Almost 30 years later, one could say that the statement made by the authors is still a valid description of what is happening today.
Recently, we have read some articles about the subsidence exposures many buildings are subject to in the Netherlands. The following article written by Pablo Fernandez Cras and published on September 3, 2022 in www.blomberg.com precisely describes the issue:
“Dutch homes built on wooden piles are rotting after severe drought. The Netherlands has long feared that climate change would bring overwhelming floods. Now, Europe’s record drought is showing that too little, not too much water, could spell disaster. Engineers noticed that the Amsterdam’s Rijksmuseum was sinking 15 centimeters (6 inches) to one side. Like most buildings built before 1970 in this marshy country, the Netherland’s national museum rests on a foundation of wooden poles – about 8’000 of them. But as dry summers caused groundwater levels to plunge, the poles were exposed, and fungi began to rot the foundations. It required a team of specialist hydrogeologists to fix the problem…..
… As many as one million Dutch houses built on pile foundations face similar problems to the Rijksmuseum and are at risk of collapse. Only a small group of engineers have the expertise to tackle the issue and it may cost as much as 100 billion Euros to fix all households that are sinking due to retreating groundwater, according to Peter Boelhouwer, professor of housing systems at the Delft University of Technology. With the throes of what appears to be its worst drought in at least 500 years, the problem may not be confined to the Netherlands, with wooden pile foundations also used in parts of Sweden, Germany and extensively in Italy’s Venice…
…As a changing climate continues to ravage the continent, the Dutch are have to rethink their strategy of water management – trying to lock in groundwater instead of keeping the sea out…
As explained in the article, an infiltration system was installed at the museum, directing water from a pond to prevent soil from drying out. “We are controlling the groundwater levels via pumps and pipes”. We are measuring it each hour. Such a system could be used to protect homes, with a water pump and sensors installed for housing blocks. That would reduce the period that foundations are exposed to the air during dry spells and slow the rot. Without such remediation, homes could collapse within a decade unless piling are replaced.”
A new land subsidence map for the Netherlands has been published jointly by the Netherlands Center for Geodesy and Geo-informatics (NCG), SkyGeo and the Delft University of Technology see more under https://www.tudelft.nl/en
But is subsidence a risk related to wood piling only?
From our research about a definition of the peril of subsidence, we came across with a very simple and well explained description provided by the Association of British Insurers (ABI) https://www.abi.org.uk as follows:
“What is it?
Subsidence is when the ground beneath a building sinks, pulling the property’s foundation down with it. Subsistence usually occurs when the ground loses moisture and shrinks due to prolonged dry spells, or the presence of trees and shrubs which cause the soil to lose moisture.
Subsidence can be cause by a variety of factors including:
Soil type – Clay soils in particular are vulnerable because they shrink, crack and shift during hot, dry weather depending on their water content. Trees and shrubs – Where clay soils are present, vegetation can be an issue if they are close to your foundations as some species absorb a lot more water, and so can dry the soil out. Local mining activity – Old mines and former quarry or pit sites can cause instability if the fill-in material collapses. Leaking drains and water mains can wash away or soften soil. Sandy, gravely soils are the most vulnerable to washing away.
Other reasons why a properties foundation can move include:
Heave – When the ground beneath a building moves upwards. Landslip/Landslide – When the ground beneath a building moves down a slope, taking the property with it.”
Look for the ABI article as it is worth reading to its full extend.
Further research about this topic took us to an article published by Tamara Soyka, Head Cat Perils EMEA, Swiss Re Institute on May 4, 2021 and which is titled “ A crack in the wall of your home: it could be a subsidence, an almost invisible natural hazard and which you could find under https://swissre.com/risk-knowledge/mitigating-climate-risk/crack-in-the-wall-of-your-home.html and which we recommend reading to its full extend.
We are highlighting here some of the raising issues in France: and in other parts of the world.
“As elaborated in our latest Sigma study, subsidence is becoming an increasingly important secondary peril for (re)insurers. Not only soaring losses, but also claims handling pose new challenges for the industry…
… looking at Europe, this peril receives the most attention in France. In contrast to most other insurance markets, since 1989 the French natural-catastrophe (CaNat) insurance system covers building losses caused by subsidence as a standard cover. After a long period of moderate annual losses that was peppered with a few exceptional years, subsidence claims have recently reached dimensions. Since 2016, inflation-corrected, annual insured losses have continuously exceeded EUR 600 million. During this period, the average annual loss reached EUR 840 million, which corresponds to about 50% of the CatNat premiums collected and thus, makes subsidence the costliest natural hazard in France. Taking the per-2016 loss statistics with an average annual loss of EUR 343 million (2000 – 2015) as a reference, this sudden and persisting claims explosion since 2016 is puzzling.”
A full explanation about the puzzling reasons is provided in above Swiss Re’s article. We want to raise here the level of losses observed in this market.
Continuing on our research tour we stop at subsidence exposure in the USA. In an article published by the Water Education Foundation and titled Land Subsidence (see full text under https://www.watereducation.org/aquapedia/land-subsidence) highlights that:
“Throughout California, subsidence has damaged buildings, aqueducts, well casings, bridges and highways. Common causes include pumping water, oil or gas, dissolution of limestone aquifers known as sinkholes, drainage of organic soils and initial wetting of dray soils, according to the U.S. Geological Survey…
… in all, subsidence has resulted in millions of dollars in damage….
…In 2009, after years of drought, USGS published a study noting once again drought conditions had caused groundwater pumping to increase, and groundwater levels are approaching their historic lows, leading to more concerns about subsidence…
…Half of all the subsidence that has occurred in the United States has occurred in California.”
Last but not least, the article published by Weronika Strzyzynska on December 31, 2020 in The Guardian titled “Land subsidence ‘will affect almost fifth of global population’” the Unesco warns of urban centres sinking because of unsustainable farming and groundwater extraction.
Subsidence, or the gradual sinking of land, could affect 19% of the world’s population by 2040, according to new research funded by Unesco.
…Jakarta has sunk more than 2.5 metres in the past 10 years, leading to the Indonesian government to make plans to relocate the country’s capital to the island of Borneo.
Gerardo Herrera-Garcia, lead researcher on the project, who is attached to the Geological and Mining Institute of Spain, said: “Areas that are heavily populated or areas that need irrigation for agricultural because they are located in places that are dry for long periods of time, they need to pump the water from underground. When they pump the water, the natural recharge of the aquifer is smaller than the volume of water they are pumping out.”
…While subsidence was a common issue throughout the 20th century, previously it was analysed only in a local context. The new project, developed by an international team of scientist, sought to consolidate existing research. The scientists produced a universally applicable model to predict which areas were most at risk of subsidence. The results showed that subsidence was a global issue, linked to a global heating as well unsustainable farming practices. “The largest aquifers in the world are being depleted for agricultural puposes”, said Herrera-Garcia.
According to Herrera-Garcia, groundwater in the US, Mexico, China and India is being rapidly drained to meet global food demand. Continued subsidence in those areas will affect populations worldwide…
Additionally, global warming is predicted to cause prolonged periods of drought, which will accelerate the rate of subsidence as more water is pumped from underground.”
Conclusion:
We believe it is time to take all these comments seriously not only as individuals but also as policymakers at local, regional and country level.
There is a strong and growing need to identify whether a building is potentially exposed to this peril but equally important to start now with the identification of risk remediation and prevention measures to mitigate the risk of subsidence at a wider level.
Expect the unexpected to happen.
And as we always say:
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