Earthquakes abroad: why you should review your coverage limits before it is too late

The recent earthquake in Venezuela reminds us of an uncomfortable reality: catastrophic risks are not a distant hypothesis. For companies with an international presence, these events highlight a specific problem: earthquake coverage limits in international insurance programmes do not always respond for the actual value of the exposure. Assets, factories, warehouses, offices, stock, goods in transit and income statements can all be affected in a matter of seconds. The question is whether the policy is prepared to respond.

How does earthquake coverage work in international insurance programmes?

Earthquake coverage in international insurance programmes is the guarantee that responds for physical damage and loss of profits caused by a seismic event at locations outside Spain. Unlike the Spanish model, where the Consorcio de Compensación de Seguros covers this risk as an extraordinary one, abroad the coverage depends on what each policy expressly establishes: it may be excluded, subject to high deductibles or limited by specific sub-limits that do not always cover the full actual exposure.

Spain: a unique model due to the Consorcio

In Spain, earthquake damage forms part of the extraordinary risks covered by the Consorcio de Compensación de Seguros, provided a policy is in force with the correct insured sums. The Consorcio includes earthquakes within the natural phenomena covered as extraordinary risks, and can indemnify direct damage and loss of profits under the terms set out in the applicable regulations and policy.

This creates a sense of very broad protection for risks located in Spain. If a company has correctly insured its buildings, contents, stock and loss of profits with adequate limits, earthquake coverage does not depend on a specific sub-limit.

Outside Spain, earthquake does not always mean full coverage

In international programmes, earthquake coverage can work very differently. In some countries it is excluded, in others it is covered with high deductibles, and in many cases it is granted through special sub-limits.

The problem arises when the earthquake sub-limit is lower than the actual value exposed. A company may have an apparently sufficient global insured sum and, at the same time, discover that for earthquake it only has a limited amount that does not cover the full potential loss.

For this reason, in international risks it is not enough to confirm that earthquake coverage exists. It is necessary to review how much it covers, where it covers and with what deductible.

The key question: does the limit cover the full actual exposure?

The review must be carried out for each risk location. It is not enough to look only at the total capital of the programme or the general property damage limit. For each location, it is worth checking that the earthquake limit is sufficient to cover the sum of all exposed items:

In practical terms, the earthquake limit should exceed the maximum reasonable exposure of that location, including not only the reconstruction or replacement of assets, but also the economic impact of the interruption of activity.

Loss of profits: the great overlooked item

After an earthquake, physical damage is usually the most visible consequence. But for many companies, the greater loss may lie in the interruption of activity.

The repair of facilities, the replacement of machinery, the reconstruction of access routes, the lack of supplies, the unavailability of suppliers or the temporary closure of an area can generate a loss of margin far exceeding the initial physical damage.

For this reason, when reviewing earthquake coverage, loss of profits should not be treated as a minor add-on. It is essential to verify that it is included, that the indemnity period is sufficient and that its capital is contemplated within the limit applicable to the seismic event.

If the earthquake limit aggregates physical damage and loss of profits together, the sum can be quickly exhausted. And if loss of profits has a specific sub-limit, it is worth verifying that it reflects the financial reality of the business.

Parametric insurance: a complementary solution for certain countries

In some markets, particularly where traditional earthquake capacity is limited, expensive or subject to very high deductibles, parametric insurance can be an interesting complementary option.

Unlike traditional insurance, which indemnifies based on the loss suffered and assessed, a parametric policy is triggered when a pre-defined parameter is met. In the case of earthquakes, that parameter may be related to ground acceleration or the distance of the epicentre from an insured location.

Its main advantage is speed. If the agreed trigger is met, the indemnity can be paid without waiting for a full assessment of the physical damage. This can provide immediate liquidity for urgent expenses, operational continuity, logistics, alternative premises rental, initial stock replacement or support for employees and clients.

That said, parametric insurance does not necessarily replace traditional insurance. It complements it. It can help cover deductibles, reduce cash flow pressure, protect exposures that are difficult to insure or strengthen locations where the traditional earthquake limit is insufficient.

A review that should not wait

The Venezuela earthquake leaves a clear lesson for any company with assets outside Spain: we should not assume that seismic risk will be treated the same way in every country. The USGS recorded two significant earthquakes in Venezuela on 24 June 2026, of magnitude 7.2 and 7.5, both with a red alert for estimated impact, illustrating the scale these events can reach in exposed areas.

In Spain we have a very particular system through the Consorcio. Outside Spain, however, each programme must be reviewed in detail: country by country, location by location and limit by limit.

The question is not only whether the policy covers earthquake. The right question is whether it covers it to the extent the company needs.

Reviewing earthquake limits, loss of profits, fixed and floating stock, deductibles and the possible incorporation of parametric solutions now can make the difference between having a policy and having real protection.

In international risks, prevention does not consist solely of taking out insurance. It consists of taking out the right insurance, with adequate limits and a complete view of the exposure. And when it comes to earthquake, that review can be decisive.

Frequently asked questions about earthquake coverage in international insurance programmes

1. Does the Consorcio de Compensación de Seguros cover earthquakes abroad?

No. The Consorcio de Compensación de Seguros only covers risks located in Spain. For locations abroad, earthquake coverage depends exclusively on what each international policy establishes: it may be included, excluded, subject to sub-limits or conditional on high deductibles depending on the country and the local insurance market.

2. What is the difference between earthquake coverage in Spain and abroad?

In Spain, earthquake is covered as an extraordinary risk through the Consorcio, without the need for a specific sub-limit if the insured sums are correct. Abroad, coverage is expressly negotiated in each programme: it may exist with sub-limits, with high deductibles, or may be directly excluded in certain countries or high-seismicity zones.

3. What limits need to be reviewed in the earthquake coverage of an international programme?

It is necessary to verify that the earthquake limit covers the sum of all exposed items at each location: buildings, contents, fixed stock, floating stock and loss of profits. It is not enough to confirm that coverage exists: it must be checked that the sub-limit is sufficient to cover the maximum reasonable exposure at each location.

4. What is parametric earthquake insurance and when is it useful?

Parametric earthquake insurance is triggered automatically when a pre-defined parameter is met, such as seismic magnitude or ground acceleration, without the need to assess the damage suffered. It is particularly useful in countries where traditional earthquake capacity is limited or very expensive, and as a complement to cover high deductibles, reduce cash flow pressure or protect exposures that are difficult to insure with conventional policies.

5. Why is it important to include loss of profits within the earthquake limit?

Because after an earthquake, business interruption can generate an economic loss exceeding the physical damage itself. If the earthquake limit aggregates physical damage and loss of profits, it can be quickly exhausted. It must be verified that loss of profits is expressly included, that the indemnity period is sufficient and that its capital reflects the financial reality of the business.