Turkey hit by M7.8 earthquake. USGS gives 78% chance damages rise above $1bn

Significant fatalities and damage have been reported after Southern Turkey was struck by a major Magnitude 7.8 earthquake this morning close to Gaziantep, near the Syrian border. The US Geological Survey (USGS) gives a 78% chance that the economic impact will reach above US $1 billion.

This earthquake is one of the largest ever recorded in Southern Turkey, although the region is particularly seismically active.

The death toll is already reported to have risen above 500 people, with that figure expected to rise much higher and the USGS Pager data suggests a 47% chance more than 1,000 deaths will have occurred from the quake.

More than 1,700 buildings are reported to be damaged or destroyed in Turkey alone, according to a statement from the Vice President, with some cities particularly badly impacted.

Kahramanmaras, a city of more than 1 million people, has been hit hard, as too have Malatya, Hayat region and reports suggest up to 10 major cities heavily affected by collapsing buildings.

Northern Syria has also seen significant damage, with over 200 reported dead in the country.

The USGS said, “On February 6, 2023, a magnitude 7.8 earthquake occurred in southern Turkey near the northern border of Syria. The earthquake was followed 11 minutes later by a magnitude 6.7 aftershock. The magnitude 7.8 earthquake resulted from strike-slip faulting at shallow depth. The event ruptured either a near-vertical left-lateral fault striking northeast-southwest, or a right-lateral fault striking southeast-northwest.

“The preliminary location of the earthquake places it within the vicinity of a triple-junction between the Anatolia, Arabia, and Africa plates. The mechanism and location of the earthquake are consistent with the earthquake having occurred on either the East Anatolia fault zone or the Dead Sea transform fault zone. The East Anatolia fault accommodates the westward extrusion of Turkey into the Aegean Sea, while the Dead Sea Transform accommodates the northward motion of the Arabia peninsula relative to the Africa and Eurasia plates.

“Although earthquakes are commonly plotted as single points on a map, they rupture planes that have dimensions. A magnitude 7.8 strike slip earthquake typically ruptures a fault ~190 km long and ~25 km wide.

“Overall, the population in this region resides in structures that are extremely vulnerable to earthquake shaking, though some resistant structures exist. The predominant vulnerable building types are unreinforced brick masonry and low-rise nonductile concrete frame with infill construction.”

The USGS Pager data suggests a 78% chance economic damages will rise above US $1 billion, which would make this a very costly earthquake event for the region.

Steve Bowen, Chief Science Officer at reinsurance broker Gallagher Re, commented that a magnitude 6.7 quake in the same region in January 2020 cost around US $600 million.

Insurance penetration is rising in Turkey and there is reinsurance capital at-risk to this event. However, the majority of the economic loss from this devastating earthquake is likely to be unprotected, resulting in the loss to the insurance and perhaps reinsurance industry likely being relatively small by comparison.

The Turkish Catastrophe Insurance Pool (the TCIP) is a public institution responsible for provision of Compulsory Earthquake Insurance to the public, helping to ensure a minimum level of coverage quite broadly.

The TCIP buys a reinsurance program and offloads some of its liabilities to international reinsurance and capital markets, although the catastrophe insurance pool has not renewed its 144A catastrophe bond since the 2015 Bosphorus issuance.

In November 2021, the TCIP renewed its reinsurance that together with its retention gave it a claims paying capacity approaching US $2.5 billion.

Munich Re and Swiss Re had the biggest shares of that TCIP reinsurance tower, which attached at around US $260 million and covered losses to close to US $2 billion, we understand, while other major reinsurers from the London and Bermuda market also participated.

The reinsurance was renewed in the fourth-quarter of 2022, but we do not have details of that tower.

There is a strong possibility that the TCIP will call on reinsurance support for paying claims from this earthquake, should the economic damages reach above the US $1 billion mark, as the USGS suggests is likely.

Turkish quake risk is a minor exposure within a number of outstanding retrocessional catastrophe bond deals, butfor any of these to be troubled it would likely require an earthquake with an epicentre closer to the largest city of Istanbul. Update: Read our article on the exposed retro cat bonds.

Numerous aftershocks have affected the area since the main quake at 04:17 am local time, causing further damages to buildings and challenges to rescuers.

The earthquake’s epicentre was around 32km (20 miles) from Gaziantep, which is the provincial capital for the region about 26km at about 17.9km (11 miles) deep, according to the USGS.

Update: A second magnitude 7.5 quake has struck the same region today, with officials initial response being that this was not considered an aftershock.

USGS information and data related to this earthquake can be found here.