Chile quake will be costly
It has been reported that Chile’s recent earthquake could result in up to $8 billion in claims, according to catastrophe modeling company EQECAT Inc. The report released this week says insured losses from the 8.8 quake that struck on Feb. 27 could have insurers paying from $3 billion to $8 billion. The range of potential loss is wide because the estimate is not yet supported by information from the scene of the earthquake, there remains uncertainty as to the extent of infrastructure damage, and business interruption costs depend on the speed at which transportation and utility networks are restored.
Reinsurers will most likely assume the bulk of the losses. According to a 2007 estimate, reinsurers assumed 74.6% of earthquake coverage in Chile. Until recent events, the loss ratio on earthquake reinsurance was less than 1% in 2007.
It’s still too early to tell if these large losses will impact property rates in the long run. There is no direct impact at this point on the earthquake market in the U.S., as all early indications are that it is still business as usual. In fact, earthquake insurance rates for U.S. risks remain stable to soft. On a global front, the market will likely tighten once these losses are realized. We will continue to watch the insurance industry’s reaction to this disaster and any potential impact it could have on property renewals.
William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.