Region has world's biggest number of highly explosive volcanoes

The Asia Pacific is home to more than 50 volcanoes that may be candidates to produce a VEI 7 eruption in future millennia, according to a report by Aon, a global firm providing a broad range of risk, retirement and health solutions.

The report cites studies by Mr Christopher Newhall, a volcanologist who is the co-creator of the Volcanic explosivity index (VEI). He has identified 125 volcanoes around the world that may be candidates to produce such a VEI 7 eruption in future millennia: 

• 22 in Southeast Asia,
• 32 in East Asia – North West Pacific,
• 13 in Eurasia,
• 5 in Africa,
• 17 in Oceania, and
• 36 in the Americas and Caribbean.

VEI 7 eruptions have global return periods of about twice in 1,000 years. Measured on the VEI, such eruptions occur somewhere in the world, on average, about twice in 1,000 years. Very large VEI 7 and VEI 8 eruptions are even rarer, with only six recorded in the last 100,000 years or on average, once in 17,000 years.

In a report titled “The Protection Gap and Large Volcanic Eruptions”, Aon outlines some of the potential economic and insurance consequences of a large VEI 7 eruption. Global economic losses from a super volcanic eruption are very unlikely to be less than $1tn, says Mr Russell Blong, emeritus professor at Aon.

Insurance implications

A VEI 7 eruption would have profound effects for insurers and reinsurers across the world. As an example of the extent of VEI 7 ash falls, more than 25,000 sq km experienced a (compacted) ash fall of 50cm or more following the 1815 Tambora eruption; about 450,000 sq km of 5 cm or more; nearly 1m sq km of 1cm or more; and more than 5.6m sq km of 1 mm or more. Some of the potential consequences, and some insurance issues, resulting from a VEI 7 eruption anywhere in the world are summarised below:

For the more than 90 catastrophe events included in Sigma reports for 2015-2017, insured losses average 48±25% of economic losses with a range extending from 1.5% to 82.5%, the range reflecting not only variations from region to region and from peril to peril but also, no doubt, the quality of the estimates of economic losses. Similarly, the protection gap will vary but it is unlikely to ever be very small. Losses to all assets – organic and inorganic – out to a distance of more than 50km from the vent are likely to be total.

VEI 7 eruptions are likely to provide a year or more of warning signs before the main event (which would probably last only a few days). However, it may be difficult to forecast the potential magnitude of the eruption until a few days/weeks beforehand. A lengthy waiting/warning time probably has significant implications for re/insurers.

Apart from total losses within around 50km or more from the volcano, a small proportion of people would die from respiratory and other diseases, roof collapses, vehicle accidents and so on hundreds of km from the vent. With total losses to buildings within 50km or more of the vent, damage could extend more than 1,000km from the eruption source. Infrastructure and commercial activities would be similarly affected.

Agricultural losses may vary by time of year (planting, growth, harvest, fallow season), except within 50 or more km of the vent where they will be completely destroyed. Losses will also vary crop by crop but cereals and legumes are particularly vulnerable because of their growth form – they also make up the bulk of world crop consumption and account for the majority of insured crop value.

Where PDCs (pyroclastic density currents) and/or ash falls greater than 30cm occur, agricultural losses are likely to be multi-year and extend several hundred km from the vent. Elsewhere, within 1,000-2,000km of the source volcano, the mix of crops, their values, growth stages, the thickness of the ash and its chemical and physical properties, and the effects of the ash fall on crop predators, together with subsequent weather, will influence the quantum of loss. Other on-farm losses may well equal crop losses in value. The consequences are likely to extend for several years, and flow-on effects may well extend to less obvious insurance covers.

Source: Asia Insurance Review