While the amount of damages and casualties from Tuesday’s magnitude-7 earthquake in Haiti continue to escalate, various reports have indicated that very little of this damage will be covered by insurance. This is because Haiti is the poorest country and one of the smallest insurance markets in the Western Hemisphere.
Current predictions are that the insured losses from the earthquake will be significantly less than the $40 billion in claims arising from Hurricane Katrina, which was the insurance industry’s most costly natural disaster. Rather, the total losses are expected to be in the low single-digit billions of dollars, only a portion of which will be covered by insurance. Haiti’s main catastrophe insurer the Caribbean Catastrophe Risk Insurance Facility, a regional fund administered by Caribbean governments, will provide approximately $8 million but there is expected to be little recovery from private insurance. There are only a few Haitian insurance companies, most of which have low levels of capital and do not generally purchase reinsurance. Therefore, most of the funds needed to aid in Haiti’s recovery will have to come from international aid.