New Zealand earthquake insured loss estimates rising

by Artemis on February 23, 2011

Insured loss estimates for the recent earthquake in Christchurch, New Zealand have been rising steadily as reports emerge from different sources. It is extremely likely that the insured loss total from this latest event will be higher than the losses from the earthquake in September as the ground shaking was so much more pronounced and severe. The final tally won’t be known for some months.

Risk modelling firm EQECAT has issued a statement which says ‘Without the preceding earthquake in September, yesterday’s event would have been expected to produce insurable damage in the range of $1.5 to $4 billion USD’. Much of the damage suffered from this latest earthquake will have been made more severe by the fact that some buildings were potentially unstable since the September NZ quake, so we think these are very conservative numbers.

AIR Worldwide suggest a much higher insured loss giving a range of US$3.5 billion to US$8 billion as the likely spread. This estimate is just for insured property losses and business interruption, so of course that may too be conservative (we feel it is likely to be towards the upper end of this range).

Meanwhile, a JP Morgan analyst is reported (by Business Insurance) to have issued a note to clients suggesting that losses could be as much as $12 billion from this earthquake. That would make this the biggest single insured loss since Hurricane Ike in 2008 and the seventh largest insured loss event since 1970.

Standard & Poor’s said that they expect this latest earthquake to put additional downward pressure on earnings of New Zealand general insurers but that major insurers should be protected from earnings pressure thanks to their capital strength and reinsurance arrangements. They also note that this event has the potential to make reinsurance pricing less attractive in that region, this could help to increase interest in capital markets risk transfer such as catastrophe bonds.

It’s likely to be some time before we know the final insured loss total for this New Zealand earthquake.

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