AIR Says Chile Quake Business Interruption Will Be Extensive

NU Online News Service, March 4, 1:00 p.m. EST

AIR Worldwide catastrophe risk modeling firm said the latest picture of earthquake damage in Chile's hardest-hit regions reveals that business interruption will be significantly extended.

The Boston-based company has estimated that the insured loss from the quake will exceed $2 billion.

With a fuller understanding of the scope of destruction, AIR said officials have reported that as much as 80 percent to 90 percent of some towns in the region by the quake's epicenter, the central coast, have been destroyed in the quake.

Damage to infrastructure, including ports there, will extend the interruption of business operations significantly AIR reported.

Up to one fifth of Chile's copper-mining capacity was halted after the quake, but has since resumed.

"According to the data we have collected during the past few years, in Chile today, masonry (reinforced, confined, or unreinforced) is the predominant construction type, accounting for roughly 60 percent of residential buildings and more than 40 percent of commercial buildings," explained Guillermo Franco, AIR senior research engineer.

Wood accounts for about 20 percent of the residential building stock, concrete, which is typically used for mid- to high-rise apartment buildings, accounts for approximately 15 percent, Mr. Franco added. According to the research engineer, about one third of commercial buildings use reinforced concrete, while steel construction accounts for about 15 percent. Industrial buildings are typically erected using steel or light metal.

Chile's capital of Santiago, 200 miles from the epicenter, has fared much better. Thousands of modern mid-rise and high-rise buildings in the capital withstood the earthquake without structural damage, thanks to a strict building code, AIR noted.

However, the company reported there are several instances of mid-rise apartment buildings that, while still standing, have suffered structural damage sufficiently severe to require their demolition.

"Chile's strong building code specifies the earthquake loads that need to be resisted," said Mr. Franco. While the building code applies nationally, construction practices can vary significantly from company to company and from region to region, he noted.

At the same time Lancashire Holdings Limited in Bermud said it believes it is premature to estimate the extent of any potential company losses likely to be incurred from the earthquake and its aftershocks or the resulting impact on first quarter results, reinstatement premiums or market pricing.

Lancashire said it has exposures to risks in Chile in classes including onshore energy, property retrocession; property direct and facultative; and property catastrophe.