Chile earthquake insured losses likely to top $2bn

AIR Worldwide estimates that insured losses from the Chile earthquake are likely to exceed $2bn and that total economic losses may exceed $15bn.

The death toll from the earthquake currently exceeds 700, though this number is expected to rise.

“The total economic loss will likely be severe from damage not only to buildings, but from the widespread impact on infrastructure, including roads, bridges, airports, and utilities and telecommunications networks,” said Dr Jayanta Guin, senior vice president of research and modeling at AIR Worldwide.

According to AIR, the area from Concepción to Santiago impacted by the quake contains residential and commercial properties with an insurable value of about $275bn. Of this total, approximately 70% is in the Santiago area and approximately 5% in Concepción.

However, of the damage incurred to these properties, only a portion is expected to be insured. Residential insurance penetration is believed to be as low as 10%, while commercial insurance penetration rates are likely significantly higher, at about 60%.

Dr Guin commented: “In the capital of Santiago, some 325km North-east of the epicenter, newer buildings have sustained damage to nonstructural elements and older buildings in Santiago have performed less well, with some sustaining major damage to masonry walls. Damage to contents is also expected to be significant. However, most newer buildings in the capital remain standing, illustrating the effectiveness of Chile’s building code, even in the face of such a major quake.”

As expected, cities closer to the epicenter have been hardest hit. Construction here is generally older and more brittle.

AIR said the towns of Talca and Curicó, which were closest to the epicenter, have suffered major damage and there are reports that much of Curicó, in which adobe construction still dominates, has been leveled, adding that such buildings are unlikely to have been insured. Significant damage has also been reported in Chile’s second largest city, Concepción, an industrial city some 115km South of the epicenter.

“Chile is located on the South American plate near the boundary with the Antarctic and Nazca plates and is one of the most seismically active regions in the world,” continued Dr Guin.

“Saturday’s quake—one of the five strongest recorded in the world over the past century—was a megathrust event that occurred at the Nazca and South American plate boundary."

“Saturday’s temblor is Chile's deadliest since the Mw8.0 1985 Valaparasio/Santiago earthquake, which killed nearly 200 people and destroyed 140,000 homes,” stated Dr Guin.

“Closer to Saturday’s epicenter, a Mw7.6 earthquake shook the cities of Concepción and Chillan in 1939. Most of the city of Chillan was flattened in that event, while in Concepción many buildings, homes, churches, and schools were destroyed.

“Fortunately the epicenter was located in a region with relatively low population density—unlike the recent Haiti earthquake, which struck close to Port-au-Prince, a city of more than 3 million people.

“Furthermore, Chile’s long history of damaging quakes has resulted in strict building codes, making the building stock considerably less vulnerable that Haiti’s."