Because so few potential clients are directly threatened by volcanoes, the insurance industry hasn’t developed sophisticated models to estimate damage due to cataclysmic eruptions. But sooner or later, a volcano located near a major population center is going to blow, and government cash alone may not be enough to heal the economic wounds. Could the insurance industry fill the void while making a tidy little profit to boot? A pair of British researchers make the case, asserting that it’s entirely possible to guess how many lives and homes will be destroyed by an eruption. The impact of Mount Vesuvius on Naples provides their central object lesson:
In terms of human casualties, the impact depends on the extent of evacuation achieved, and a very effective evacuation is assumed in which 98.5% of the population have been evacuated by the end of Phase 1. However, given the immense population at risk there would still be an estimated 8,000 deaths and 13,000 injuries resulting from this large-scale eruption, and there are also certain to be insurance implications from these casualties.
The authors do note, however, one potential complicating factor in the nascent volcano-insurance field: whether to issue policies that can cover the climate-altering effects of major eruptions, too. Think that sounds far-fetched? Meet Mount Tambora, the Indonesian volcano responsible for the infamous “Year Without Summer.”