NU Online News Service, March 3, 3:38 p.m. EST

Extended disruption of commerce and construction material shortages will inflate the multibillion-dollar cost of rebuilding Chile's quake-damaged areas, said Risk Management Solutions.

The warning by the Newark, Calif.-based catastrophe modeling firm follows an estimate Monday by Oakland, Calif.-based Eqecat modeling firm that Chile's economic damage will hit $30 billion. Insured loss estimates have ranged from $2 billion to $8 billion.

RMS said the greatest insured losses will come from damage to expensive properties in the Valparaiso vicinity.

Robert Muir-Wood, RMS chief research officer, predicted that "the ultimate costs of the earthquake will become exacerbated by extended periods of business disruption and by cost increases due to shortages of materials and workers to advance the reconstruction."

"With more than a million properties known to be damaged, there will be shortages of building materials and labor, raising the costs of repairs. People will also expect their reconstructed buildings to be built to better standards than the ruins they replace," said a statement from Mr. Muir-Wood.

While the highest fault displacement and ground motion from the Chile earthquake was toward the south of the rupture close to Concepcion, the rupture also extended to the north coast to within 50 km of the city of Valparaiso, RMS said.

It is the level of damage to high-value properties in this densely populated and wealthy region that will be a key driver of the overall insurance loss in the earthquake, RMS explained.

The firm noted that the main concentration of high-value buildings and insured exposure runs in a corridor from the coastal cities of San Antonio, Valparaiso and Vina del Mar extending inland to the capital city of Santiago with its 5.9 million people--36 percent of Chile's total population.

RMS mentioned that across this region there are numerous 10-20 story reinforced concrete buildings designed to a strong building code. However, the low-frequency, strong motion from the recent earthquake made buildings of this height range resonate so strongly that in some cases the key structural components have fractured.

In the wealthy coastal town of Vina del Mar a dozen major apartment buildings have serious structural damage and up to 6,000 people have been forced to move out. Several of these high-value buildings are so badly damaged at their core that they will have to be demolished, reported RMS.

South of Valparaiso, around the middle section of the fault rupture, RMS said the accompanying tsunami has severely impacted both coastal ports and some wealthy coastal resort communities.

In the 1960 magnitude 9.5 earthquake--immediately south of the 2010 fault break--displacement along the fault rupture reached 66 feet, sufficient to cause subsidence at the surface, lowering the ground by as much as 8 feet.

"In the southern coastal city of Valdivia, low-lying streets and houses became permanently flooded after the 1960 earthquake and had to be abandoned. Evidence suggests similar subsidence from the recent fault rupture has affected certain coastal communities, potentially requiring houses to be relocated inland," commented Mr. Muir-Wood.

In addition to housing and commercial buildings, heavy industries and infrastructure were strongly affected by the recent earthquake in the coastal region, RMS said.

It added that electricity grids, highways and bridges, ports, mines, refineries, and communication networks have sustained losses and many communities still lack functional electricity and communication networks. Looting and fires in the city of Concepcion were said to be hampering relief efforts.

Special Reports /

Chile Earthquake Rebuilding Costs Will Soar, RMS Says

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