In a report released Tuesday, the insurance bureau based its findings on a hypothetical scenario where B.C. is hit by a 9.0 magnitude earthquake off the west coast of Vancouver Island and Quebec suffers a 7.1 magnitude earthquake near the provincial capital.
The bureau said damages such as those incurred in the scenarios would exceed the insurance industry's capacity to respond.
The study by catastrophe analysts AIR Worldwide predicted potential economic losses of $75 billion in the B.C. seismic zone, and $61 billion in the Quebec one.
By way of comparison, that figure for Quebec is nearly the total cost of the province's annual budget and the figure for B.C. is far higher than its total annual budget.
"Events of this magnitude have a domino effect on the Canadian economy triggered by property damage, supply chain interruption, loss of services, infrastructure failure and business interruption," said Don Forgeron, the insurance bureau's president.
"Insurers, governments and all Canadians have a responsibility to prepare. If a mega-earthquake should strike in a densely populated area, insurance alone will not pay for all the damage. Governments and consumers have a role to play."
Forgeron added that the study indicates that preparedness will mitigate risks and that such things as more resilient buildings and infrastructure can reduce economic losses by a third or more.
The study, which was completed for the insurance bureau in July but released Tuesday, acknowledges that such earthquakes are considered a 1-in-500-year event. It notes that the evaluation is not a prediction of future events.
The report said that earthquakes in Japan, Chile, New Zealand, and Turkey during the last few years highlighted the need for insurance industry preparedness.
The study notes that Canada experiences about 4,000 earthquakes every year, most of them small and not noticed by people.
There have been at least 24 significant earthquakes in Canada in the last 300 years which have had a magnitude of 5.0 or greater.
These were concentrated off the west coast of B.C. and in southeastern Canada, mainly in southern Quebec and southeastern Ontario.
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