Policy Studies Finance and Trade

Earthquakes and home mortgage risk

The United States faces severe earthquake risk in many areas of the country, yet consumers routinely choose not to purchase insurance products to cover this risk. Low earthquake insurance take-up rates create a scenario in which a major event could result in significant mortgage defaults. The problem is real and serious, although understanding its precise magnitude will require more research. However, there is ample reason to believe the insurance and reinsurance markets are sufficiently well-capitalized to address the issue. Confronting the risk of mortgage default will require changes to product offerings, mitigation efforts and mortgage-loan underwriting standards.

Featured Publications