When the Northridge earthquake struck southern California in 1994, it caused an estimated $25 billion in insured losses. The insurance industry paid out more in claims for this earthquake than it collected in earthquake premiums over the prior 30 years.
In the early hours of January 17, 1994, a 6.9 magnitude earthquake struck Northridge, California, about 19 miles outside of Los Angeles. Lasting no more than 20 seconds, the quake injured 9,000 people and killed 57. The quake occurred at 4:30 am, which minimized the death toll.
Although not of a severe magnitude, the Northridge earthquake caused monumental damage, hitting a built-up, heavily populated urban region. It toppled buildings and freeways, even taking down a 2,500-car parking garage. More than 40,000 buildings were damaged, and 20,000 people were left homeless. It also triggered landslides that damaged homes and water lines, and blocked roads. The earthquake caused an estimated $20 billion in property damage.
Insurance company losses from the Northridge earthquake caused many companies to severely limit future coverage or entirely exit the market in California. This led to the creation of the California Earthquake Authority. Still, only about 12% of California homeowners carry earthquake insurance due to high premiums.