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BOSTON, March 1, 2010 – Catastrophe risk modeling firm AIR Worldwide estimates that insured losses from the Mw8.8 earthquake that struck central Chile early Saturday February 27th will likely exceed USD 2 billion (CLP 1,050 billion). Total economic losses may exceed USD 15 billion (CLP 7,875 billion). The death toll from the earthquake currently exceeds 700, though this number is expected to rise.
“The total economic loss will likely be severe from damage not only to buildings, but from the widespread impact on infrastructure, including roads, bridges, airports, and utilities and telecommunications networks,” said Dr. Jayanta Guin, senior vice president of research and modeling at AIR Worldwide.
According to AIR, the area from Concepción to Santiago impacted by the quake contains residential and commercial properties with an insurable value of about USD 275 billion (CLP 144,375 billion). Of this total, approximately 70% is in the Santiago area and approximately 5% in Concepción. However, of the damage incurred to these properties, only a portion is expected to be insured. Residential insurance penetration (the percentage of properties that are insured for earthquake) are believed to be as low as 10%, while commercial insurance penetration rates are likely significantly higher, at about 60%.
Dr. Guin commented, “In the capital of Santiago, some 325 km northeast of the epicenter, newer buildings have sustained damage to nonstructural elements and older buildings in Santiago have performed less well, with some sustaining major damage to masonry walls. Damage to contents is also expected to be significant. However, most newer buildings in the capital remain standing, illustrating the effectiveness of Chile’s building code, even in the face of such a major quake.”
As expected, cities closer to the epicenter have been hardest hit. Exacerbating matters, construction here is generally older and more brittle. The towns of Talca and Curicó, which were closest to the epicenter, have suffered major damage and there are reports that much of Curicó, in which adobe construction still dominates, has been leveled; however, such buildings are unlikely to have been insured. Significant damage has also been reported in Chile’s second largest city, Concepción, an industrial city some 115 km south of the epicenter.
“Chile is located on the South American plate near the boundary with the Antarctic and Nazca plates and is one of the most seismically active regions in the world,” continued Dr. Guin. “Saturday’s quake—one of the five strongest recorded in the world over the past century—was a megathrust event that occurred at the Nazca and South American plate boundary.”
“Saturday’s temblor is Chile's deadliest since the Mw8.0 1985 Valaparasio/Santiago earthquake, which killed nearly 200 people and destroyed 140,000 homes,” stated Dr. Guin. “Closer to Saturday’s epicenter, a Mw7.6 earthquake shook the cities of Concepción and Chillan in 1939. Most of the city of Chillan was flattened in that event, while in Concepción many buildings, homes, churches, and schools were destroyed.”
“Fortunately the epicenter was located in a region with relatively low population density—unlike the recent Haiti earthquake, which struck close to Port-au-Prince, a city of more than 3 million people,” added Dr. Guin. “Furthermore, Chile’s long history of damaging quakes has resulted in strict building codes, making the building stock considerably less vulnerable that Haiti’s.
Note to Editors:
* Losses are expressed in billions of Chilean Pesos (CLP) and US Dollars (USD), and the assumed exchange rate is 1 USD = 525 CLP.
** AIR’s insured loss estimates reflect:
- Insured physical damage to property (residential, commercial/ industrial, auto), both structures and their contents
- Business interruption losses
- Demand surge—the increase in costs of materials, services, and labor due to increased demand following a catastrophic event
AIR’s insured loss estimates do not reflect:
- Losses to uninsured properties
- Losses to infrastructure
- Losses from non-modeled losses, including loss adjustment expenses, fire-following, tsunami and landslide.
About AIR Worldwide
AIR Worldwide (AIR) is the scientific leader and most respected provider of risk modeling software and consulting services. AIR founded the catastrophe modeling industry in 1987 and today models the risk from natural catastrophes and terrorism in more than 50 countries. More than 400 insurance, reinsurance, financial, corporate and government clients rely on AIR software and services for catastrophe risk management, insurance-linked securities, detailed site-specific wind and seismic engineering analyses, agricultural risk management, and property replacement cost valuation. AIR is a member of the ISO family of companies and is headquartered in Boston with additional offices in North America, Europe and Asia. For more information, please visit www.air-worldwide.com.