Italy Quakes May Cause Up to $875m in Insured Losses: Eqecat

NU Online News Service, May 30, 11:03 a.m. EDT

Catastrophe modeler Eqecat has put an estimate of up to $875 million for insured losses related to recent earthquakes in Northern Italy.

Yesterday the Emilia-Romagna region was struck by aftershocks with magnitudes of 5.8 and 5.4. The quakes caused further damage to structures affected by the magnitude 6.0 mainshock in the same area on May 20.

Several thousand people remain homeless since the May 20 temblor. More than 20 people have died, others are missing, and hundreds have been injured since the first quake.

Residential and commercial structures, as well as churches, have been affected by the earthquakes. Historical buildings, such as a 14th century clock tower, and art, have been destroyed.

Eqecat's revised estimate of between $375 million and $875 million is up dramatically from its initial insured-loss estimate of about $127 million. The revision is due to more losses from the recent aftershocks and an “updated insight on insured values in the region,” says Eqecat.

“These latest events are expected to create significant new losses,” says the modeler. Structures damaged in the May 20 earthquake were vulnerable to subsequent quakes, and the region remains at risk of additional damaging aftershocks.

The wide range of predicted insured losses is due to exposure uncertainty. If a heavily-damaged facility is one that is covered, the insured-loss estimate could be influenced, adds EQECAT.

Catastrophe modeler Risk Management Solutions (RMS) explains Italian earthquake losses to the insurance industry have historically been small due to a low penetration of earthquake insurance in the country.

For commercial and industrial earthquake risks, insurance penetration is higher—about 40 percent of risks are covered—but even then, coverage provided is limited, says RMS.

“Full value earthquake insurance policies are extremely rare in Italy, if offered at all, and most policies typically have limits between 20 percent and 50 percent of sums insured,” according to a brief from the modeler.

Eqecat says the towns of Mirandola, Finale Emilia, San Felice, Cavezzo and San Passidonia were significantly impacted by these earthquakes. Buildings in the capital city of Bologna are being investigated for damage.

A warehouse collapsed in Mirandola, according to reports. Many facilities remained closed since the May 20 earthquake but preparations were reportedly underway to start operations again. In San Felice a warehouse collapsed, killing three.