The massive earthquake that is reported to have killed thousands in China's Sichuan province today may involve limited insured losses for some sectors, a catastrophe modeling firm said.
Boston-based Air Worldwide said insured losses will be mitigated by the low amounts of properties with earthquake insurance, which AIR estimates to range between 2 percent and 5 percent in the epicentral region.
However, insurance take-up rates for projects under construction, the coverage referred to as "construction all risks, erection all risks" (CAR/EAR), are higher–up to 40 percent–and this may have a significant impact on insured losses in rapidly growing Chengdu, the company said.
Risk Management Solutions, London office, reported that 7,000 casualties were reported with more than 100 fatalities occurring from the collapse of a school in Dujiangyan City, some 25 miles from the epicenter, and four casualties were reported from another school falling down in Liangping. Damage has been reported from a very broad area, with a building collapsing over 190 miles away, RMS said.
RMS said its scientific partners in China, The Institute of Engineering Mechanics, was sending in 20 people to the affected region to make an assessment.
Aon Impact Forecasting said the Chinese government had said it feared at least 5,000 have been killed and 10,000 injured, and Sichuan provincial disaster relief headquarters estimated 80 percent of all buildings collapsed in the area.
Rahsaan Johnson, an Aon spokesman said it is unclear what the quake's insured losses will be at this point, "particularly due to the uneven level of insurance penetration in many areas of the country."
Air said the China Earthquake Authority and the U.S. Geological Survey issued a magnitude estimate of 7.8 and focal depth of just 6.2 miles, making this a shallow event.
But the firm said the magnitude may be revised as more information comes in from seismic networks around the world.
The epicenter was 56 miles west-northwest of the province's capital and largest city, Chengdu, which has a population of about 12 million. More than a dozen aftershocks of M5.0 or greater have been recorded, including at least one of more than M6.0.
Bingming Shen-Tu, China Project Manager at AIR Worldwide, said in a statement: "The quake occurred along the border between the more fractured rock of western China and older, denser rock to the east. Dense rock propagates seismic energy over a large area, which, together with the large magnitude of this event and the long-period waves it generated, explains why it was so widely felt, particularly by people in high-rise buildings."
He said tremors were felt across the eastern half of China and as far away as Shanghai, Hong Kong, Taiwan, and even Hanoi, Vietnam, and high-rise buildings in Beijing and Shanghai were briefly evacuated.
A very long, flexible construction crane in Xian, about 310 miles north of the epicenter, crumpled–"further evidence of strong, propagating long-period ground motion," he noted.
According to Air Worldwide, building codes in China are quite strict and a 2001 revision reflected advances in research, construction materials and practice during the current period of rapid economic growth. However, the firm said, "while the codes are strict, it is difficult to determine how strictly they are enforced."
Mr. Shen-Tu said, "Images coming out of the affected region suggest that many newer mid- to high-rise apartment buildings have sustained some structural damage, with large cracks seen in walls. This speaks to the magnitude of this event. Other images show toppled cranes at construction sites, indicating losses to the "construction all risks, erection all risks" coverages.
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