As the insurance industry mobilizes in response to the fifth largest earthquake on record, our thoughts remain with our friends, business associates and everyone else impacted by the devastation in Chile. In the wake of the quake and numerous aftershocks, the death toll in Chile has risen to over 700, thousands are missing, 2 million are estimated homeless and property damage is widespread.
In stark contrast to the recent earthquake in Haiti, a significant portion of the economic damage resulting from Saturday's Chilean earthquake may implicate insurance and reinsurance sold by foreign companies. Chile's local insurance association, La Asociacion de Aseguradores de Chile (ASACH), has estimated insured losses at US$2.6 billion. The calculations, based upon modeling derived from the association's experience in the earthquake of 1985, represents more than half of the industry's usual annual payout in recent years (US$ 5 billion). Nonetheless, ASACH president Mikel Uriarte reportedly stated that "We will respond well, as we responded last time in the earthquake of 1985 . . . the companies are solvent and, in general, this insurance is reinsured internationally because we believe in the spreading of risk."
The Chilean insurance regulator, the Superintendencia de Seguros y Valores, has also spoken out in the days after the earthquake, advising consumers to direct their claims and questions about their policies to their insurers or insurance agents. In addition, the SVS has invited inquiries through a dedicated phone line or through the SVS website.
AIR Worldwide has reportedly estimated economic losses from the earthquake at US$ 15 billion, while Eqecat has reportedly estimated economic damages at US$ 15 to US$ 30 billion. Of those total losses, AIR Worldwide has reportedly estimated that up to US$ 2 billion could be covered by insurance, while Eqecat has estimated insured losses at between US$ 3 billion and US$ 8 billion.
The Chilean insurance and reinsurance market is one of the best developed in Latin America, and the nation has one of the region's highest insurance penetration rates at approximately 3.5% of GDP. Risk Management Solutions reportedly estimated that 90% of property insurance policies in the country contain earthquake coverage.
Approximately half of the losses from the earthquake are expected to be centered in the state of Santiago, with an additional 25% in the state of Valparaiso. Some of the nation's largest losses are expected to come in the industrial sector. While no structural damage has yet been reported from the nation's large mining sector, several local petroleum refineries have reportedly halted operations.
For additional information about the Chilean insurance and reinsurance markets, please click here.
For our earlier blog post regarding the situation in Haiti, please click here.