Editor's Note: This article originally appeared in National Underwriter, P&C.
An early catastrophe modeling firm estimate puts the economic damage from the Chile earthquake at up to $30 billion.
Oakland, Calif.-based Eqecat put the value of economic damage in the range of $15-to-$30 billion USD, or 8-to-16 trillion Chilean pesos. The company said this equates to 10-to-15 percent of Chile's real GDP.
Insured loss estimates were not immediately available.
Risk Management Solutions in Newark, Calif., said today that earthquake coverage is widespread in Chile, with 90 percent of property insurance policies carrying earthquake cover.
"Given the recent history of earthquakes, insurance penetration in Chile is relatively high at around 3.5 percent of GDP. To put this in context, coverage there is higher than in Mexico, although still lower than the U.S.," commented Claire Souch, RMS vice president.
"A lack of power and damage to infrastructure is likely to increase demand for materials and labor and escalate insured losses. As previous events have shown, this could be in the order of 30 percent," she noted.
RMS said the epicenter of the quake was 70 miles from the city of Concepcion, the hardest hit community. The capital city of Santiago is 200 miles from the epicenter of the magnitude 8.8 quake and experienced magnitude 7 shaking with damage throughout.
Eqecat noted that Chile's widespread adoption and enforcement of modern, seismic-resistant building practices has mitigated the potential for devastation.
AIR Worldwide in Boston mentioned that Chile has a long history of building code evolution, beginning in 1928. A year after its 1985 magnitude 8 quake, the government of Chile asked the Chilean Institute of National Standards to revise the 1972 building codes, and revised codes were released in 1993.
Of the collapsed buildings, Eqecat said it expected they would be a minority of the overall building stock. Costs of reconstruction often exceed the value of economic damage since new construction typically uses newer (current) building standards, the firm noted.
Damages in the state of Santiago are expected to exceed 50 percent of the total damages. It is the largest commercial and population center in Chile and almost five million people in the city of Santiago experienced very strong ground motions from this event, Eqecat reported.
The state of Valpara?so to the west of the epicenter was expected to have sustained damage of about 25 percent of the total damage from the earthquake.
RMS said some of the largest losses are expected to be from large industrial facilities. Copper mining is Chile's largest export activity and production was interrupted by power shortages, but there has been no structural damage to the facilities reported so far, it was noted.
Oil refineries, said RMS, appear to be the most affected. Aconcagua oil refinery located close to Santiago, has currently halted operations and may be fixed within six days. Bio Bio oil refinery, located in a coastal location close to the Concepcion has the largest output in the country and is in the epicentral area. Though the extent of damage to this facility is not known, statements from the government indicate that the repairs to this facility are expected to take longer than at Aconcagua.
Eqecat is a subsidiary of ABSG Consulting Inc
Dan Hays is assistant managing editor of National Underwriter, part of Summit Business Media's P&C Magazine Group, which includes Claims.