The September 8th magnitude 8.1 earthquake that struck off the coast of Chiapas, Mexico is estimated to have caused an insurance and reinsurance industry loss in a range from MXN 14 billion (US $787m) to MXN 20 billion (US $1.13bn), according to catastrophe modeller AIR Worldwide.
It’s a relatively high toll for an earthquake which damaged many rural areas and coastal towns in the region, high enough that some reinsurance capital support may be called on, particularly by commercial insurance providers.
The earthquake was the highest magnitude earthquake to affect Mexico in a century and has triggered the World Bank supported IBRD / FONDEN 2017 catastrophe bond’s earthquake tranche of notes. This cat bond tranche has been priced for a total loss by the market, as investors expect the full $150 million will pay out.
It’s not known whether AIR’s estimate includes the catastrophe bond or not. We’d tend to assume it isn’t included, despite the fact it is clearly a source of insurance capital likely to pay out due to this quake.
AIR described the damage reported:
Mexico City came through without experiencing major damage, although buildings swayed and residents ran into the streets. A highway under construction to the city’s new airport partially collapsed, and windows at the existing airport shattered.
The states of Oaxaca and Chiapas were hardest hit and have experienced numerous aftershocks, dozens of which were M4.5 or greater; at least 96 people were killed. According to federal officials, 12,000 homes were damaged in Oaxaca. The number of destroyed homes reported ranges from 971 in Oaxaca to 5,000 to 7,000 in Juchitán alone. All sources agree that Juchitán, which is located on what is commonly known as the Isthmus, was the worst-hit city in Oaxaca. In Chiapas, the damage was far greater overall: the Chiapas Civil Protection Agency reports that more than 54,000 homes were damaged, about 37,000 of which experienced partial damage, and nearly 18,000 of which collapsed. The state authorities also report that there were 97 municipalities affected, mainly Tonalá, Villa Flores, San Cristóbal, Cintalapa, and Jiquipilas.
In Chiapas, at least 98 healthcare facilities and 129 public buildings were damaged. Many roads, highways, and bridges were also affected.
AIR’s loss estimates are focused on damage from ground shaking. The losses included are insured physical damage to onshore property (residential, commercial/industrial), both structures and their contents, and automotive losses.
This estimate of insured losses is based on AIR’s assumptions about insurance take-up rates in Mexico, which it notes there is considerable uncertainty about.
Economic losses are expected to be much higher, AIR notes.
Another magnitude 7.1 earthquake struck Mexico today much closer to Mexico City, as we reported earlier. This quake is expected to result in a considerably higher loss for insurance and reinsurance interests as the damage to buildings in the capital and elsewhere was considerable.
The 2017 catastrophe loss bill for the re/insurance industry to pay is rising, with this and today’s quakes set to add to the tally, putting $100 billion+ in sight for year-end.