Official estimates suggest that there is a 30 per cent probability of a major earthquake impacting Canada over the next 50 years. At current levels of capitalization, Canada is not prepared to deal with the macroeconomic and fiscal consequences of a large earthquake, which could cause widespread failures among insurance companies and trigger a domino effect in the financial sector.

Macroeconomic Impacts and Systemic Financial Risk: Canada’s Earthquake Risk analyzes some of the research results of such an event. Despite reconstruction efforts, nearly 450 person-years of employment would be lost, GDP growth would be halved in the short term, and real GDP would decline by nearly $100 billion over the medium to long term. Taxpayers would be left to bear the cost of unexpected budget deficits—totalling nearly $90 billion federally and $35 billion provincially—to support reconstruction and boost the economy.

Executive Summary

Chapter 1—Introduction

Chapter 2—The Insurance Industry and Natural Disasters in Canada

• Notable Catastrophes in Canada

Chapter 3—Methodology

• Data Collection and Preparation
• Modelling Approach

Chapter 4—Findings

• Background—Understanding Insolvency Management and Policyholder Compensation in P&C Insurance
• Assumptions for Modelling Financial Contagion
• Results

Chapter 5—Conclusion

Appendix A—Bibliography

Appendix B—Medium-Term Forecasting Model