NU Online News Service, Jan.13, 10:46 a.m.EST

The magnitude 7.0 earthquake that caused catastrophic death anddestruction in Haiti created hundreds of millions in economicdamage, but insurance coverage for losses is minimal, according tomodeling firms.

Risk Management Solutions of Newark, Calif., cited data fromLondon-based AXCO insurance information services listingimpoverished Haiti as one of the smallest markets in the Americaswith a total non-life premium income of just under $20 million.

Insurance penetration is extremely low at around 0.3 percent ofGross Domestic Product. The majority of Haiti's insured risks aresituated in Port-au-Prince, and motor insurance accounts for 50percent of all non-life premiums, RMS said.

Eqecat catastrophe risk modeling firm in Oakland, Calif.,estimated economic damages from yesterday's quake to be "in thehundreds of millions of dollars."

"Due to expected better underwriting standards than generalbuilding standards, insured buildings will generally perform betterthan the typical building, but this earthquake is very severe, andeven well-designed buildings could expect damage from this event,"the firm said.

The epicenter of the quake was pinpointed as 10 miles south ofPort-au-Prince, the capital city.

Eqecat said the quake was most likely a strike-slip on theEnriquillo Fault, which the U.S. Geological Survey estimatesoccurred at a depth of 6 miles.

At least three aftershocks greater than magnitude 5.0 occurredin the hours immediately following the main shock. The earthquakewas felt widely, including in the Dominican Republic, thesoutheastern portion of the Bahamas, as well as in Jamaica andCuba.

RMS said current estimates are that up to two million peoplewere affected by intense ground motions.

The firm said buildings in the region tend to be built withheavy materials (concrete, masonry) and with little or none of thelateral reinforcing needed for earthquake resistance.

Neena Saith, senior catastrophe response manager at RMS, notedinitial reports of widespread damage and thousands of fatalities inHaiti. "Around Port-au-Prince there's a striking contrast ofhigh-end properties and shanty housing extending up the hillsides,with no building regulations in force to protect against earthquakedamage," she said.

"Early reports suggest hundreds of buildings have collapsed inPort-au-Prince, including the presidential palace, the World Banklocal offices, hotels, a hospital, the University and the UnitedNations headquarters. Hundreds of other buildings have also beendestroyed or sustained severe damage. Hundreds of thousands ofpeople are estimated to be made homeless; however, this is a veryearly estimation."

Mary Lou Zoback, vice president for Earthquake Risk Applicationsat RMS, said Haiti is the poorest country in the Western Hemispherewith 80 percent of the population living under the poverty line andover 50 percent in abject poverty.

"As rural poor migrate to the major cities they often take upresidence in shanty towns on the city margins. They live inself-constructed homes, built using available materials. Thissubstandard construction cannot stand up to the frequenthurricanes, landslides and earthquakes that strike so many capitalcities such as in Latin America, including Port-au-Prince," shesaid.

Across Haiti's infrastructure disruption created cutoffs inwater, electricity and telephone services and widespread poweroutages. The damage hampered relief efforts and limited the amountof information reaching other countries.

The last major earthquake to hit Port-au-Prince occurred in1770, causing 250 deaths and extensive damage. In recent years,only relatively minor earthquakes have been recorded, such as thosein 1990 and 1994, with minimal to no damage, RMS said.

AIR Worldwide modeling firm said the Caribbean Catastrophe RiskInsurance Facility (CCRIF)-a parametric insurance pool-launched in2007 to limit the financial impact of catastrophic hurricanes andearthquakes by providing short-term liquidity when a policy istriggered. has issued a statement indicating that yesterday'searthquake will likely trigger a payout.

A CAT-i report from Guy Carpenter reinsurance brokerage saidcited a U.S. Geological Survey figure that three million peoplelive in areas impacted by heavy quake intensity equivalent to verystrong shaking with the potential for moderate to heavy damage.

It noted initial reports of widespread destruction, with heavilydamaged structures that include the presidential palace, thefive-story United Nations headquarters, World Bank offices, andcollapsed hospitals and hotels in Port-au-Prince.

Guillermo Franco, senior research engineer at AIR Worldwidemodeling firm in Boston noted that "Haiti has suffered more thanits fair share of disaster in recent years. In 2008, it was hit byfour tropical cyclones--Fay, Gustav, Hanna and Ike--in the courseof three weeks. In 2004, Hurricane Jeanne brought extensiveflooding and landslides."