San Francisco's New Seismic Retrofit Ordinance: Insurance Implications and Opportunities

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San Francisco's New Seismic Retrofit Ordinance: Insurance Implications and Opportunities

May 13, 2025

San Francisco is taking a significant step forward in earthquake preparedness with the development of its Concrete Building Safety Program (CBSP), which includes new retrofit requirements for non-ductile concrete buildings and concrete tilt-up structures (technically referred to as "rigid wall-flexible diaphragm" or RWFD buildings). The implications of this ordinance for property owners and the construction industry have been well discussed but not yet for the insurance industry.

For E&S carriers writing earthquake coverage, this represents both a challenge and an opportunity. Let's explore what the ordinance entails and how it might reshape your approach to underwriting in the San Francisco market.

Understanding the Ordinance: An Engineering Perspective

The Buildings in Question

San Francisco's new retrofit ordinance targets two vulnerable building types that have performed poorly in past earthquakes:

Non-Ductile Concrete (NDC) Buildings: Concrete structures with insufficient reinforcement to accommodate earthquake movement without excessive damage. These buildings lack the ability to deform without breaking when subjected to strong ground motion.
Concrete Tilt-Up Buildings: Common in commercial and industrial settings, these feature stiff concrete walls combined with flexible roof systems (typically wood or metal deck). During earthquakes, the flexible roof allows movement that can damage the critical connections between walls and roof. While "concrete tilt-up" describes the most common building type affected, the technical term "rigid wall-flexible diaphragm" is broader, also including other structures with similar vulnerabilities such as large open retail spaces with masonry walls or wood framing.

Both building types represent significant collapse risks during major seismic events, with the ordinance applying to structures exceeding 3,000 square feet of gross floor area.

Technical Requirements in Plain Language

The retrofit requirements focus on addressing critical vulnerabilities while balancing feasibility and cost concerns:

For NDC Buildings: The ordinance addresses six critical vulnerabilities in non-ductile concrete buildings: (1) Weak & Soft stories - where one floor is significantly weaker or more flexible than those above it. (2) Plan or vertical irregularity - discontinuities or offsets in the structural system. (3) Non-ductile concrete frames - structures with beams and columns that can't deflect without severe damage such as the Olive View Hospital during the 1971 seismic event as shown below [1]. (4) Shear-governed columns or wall piers - commonly known as "short columns" that can experience a sudden failure without any obvious prior cracking. (5) Inadequate floor-column connections - insufficient reinforcement between columns and slabs, creating risk for “pancake” collapse. (6) Insufficient support for concrete elements - particularly in precast concrete buildings where beams have inadequate bearing support—common in older parking structures.

For Concrete Tilt-Up Buildings: Requirements focus primarily on strengthening the connections between walls and roof structure, including the anchoring systems and load transfer elements that ensure building components remain connected during violent shaking. The objective is to prevent failures such as those shown below for a tilt-up building that suffered partial collapse after the 1994 Northridge earthquake [2].

Building owners will have two compliance paths: (a) Address specific deficiencies while meeting a lower performance threshold, or (b) Meet a higher overall performance standard without necessarily addressing each specific deficiency. The ordinance is expected to establish a phased implementation timeline similar to Los Angeles (which allowed 25 years for completion), recognizing the substantial costs and logistical challenges involved. Property owners should start with a building assessment before moving forward to a retrofit design.

Risks and Opportunities for Insurance Carriers

Near-Term: Portfolio Management Recommendations

Immediate Risk Assessment: The draft ordinance effectively identifies the city's most seismically vulnerable concrete buildings. This provides carriers with an opportunity to proactively review their exposure to these building types. Are you currently insuring properties that will fall under this ordinance? What percentage of your San Francisco portfolio might be affected? … As part of the ordinance, property owners should perform building assessment, these are valuable documents that you can request for competitive underwriting.

Pricing Stratification: The ordinance creates natural risk stratification opportunities. Buildings that have already been retrofitted, were built after the benchmark dates, are exempt due to structural configuration, or are early compliance adopters all represent potentially better risks than equivalent buildings that haven't addressed these vulnerabilities. This naturally suggests a tiered approach to pricing that reflects the actual risk differences between these building categories.

Policy Language Review: Now is the time to review policy language regarding ordinance and law coverage, particularly as it relates to increased cost of construction due to retrofit requirements, loss of income during retrofit construction, and demolition costs if retrofit is economically unfeasible. Clarity on these coverages will be critical as building owners begin to assess their options and take action.

Medium-Term: Risk-adjustment Premium to Incentivize Early Adopters

Forward-thinking insurers have an opportunity to create structured premium incentives that reward building owners who move quickly to comply. Consider developing a tiered pricing structure that provides progressive risk-adjustments as owners complete different phases of the retrofit process: initial engineering assessment, retrofit design completion, permit approval, and construction completion. Such a program not only rewards responsible building owners but can attract higher-quality risks to your book. By recognizing incremental improvements in a building's risk profile, carriers can encourage and accelerate adoption of the ordinance while strategically improving their portfolio quality.

Long-Term: Portfolio transformation

As the retrofit program progresses, carriers have the opportunity to strategically transform their portfolio composition. The ordinance creates a natural timeline for gradually shifting your book toward lower-risk properties while maintaining market presence.

With potentially thousands of vulnerable buildings becoming more resilient, the ordinance should gradually reduce expected losses in a major earthquake. Carriers who maintain presence in the market stand to benefit from this improving risk landscape.

How ResiQuant Can Help

ResiQuant's AI-powered property intelligence platform is uniquely positioned to help E&S carriers navigate the evolving San Francisco retrofit landscape. Our technology quickly identifies which buildings in your portfolio are affected by the ordinance by analyzing construction characteristics, building age, and structural systems. We maintain a continuously updated database that monitors retrofit activities across San Francisco, giving you real-time visibility into compliance status for your insured properties, including tracking permit applications, approvals, and construction completions. Most importantly, our platform provides property-specific vulnerability assessments that support more informed underwriting decisions, allowing you to distinguish between buildings with similar characteristics but different risk profiles based on their retrofit status and specific structural features. By combining structural engineering expertise with advanced AI capabilities, we deliver actionable intelligence that helps you make more profitable decisions in this evolving regulatory environment.

Conclusion

San Francisco's concrete building retrofit ordinance represents a significant step forward in the city's progress towards seismic resilience. For E&S carriers writing earthquake coverage, it creates both challenges and opportunities. By taking a proactive approach—understanding the technical requirements, reassessing portfolio exposure, developing innovative pricing structures, and leveraging advanced risk intelligence—carriers can turn this regulatory development into a strategic advantage.