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NEW YORK (Reuters)—Catastrophe modeler EQECAT Inc. released a defense of its loss estimate of $3 billion to $5 billion for Monday's Christchurch, New Zealand, earthquake, saying its models suggested that would be the incremental damage to the city over and above February's quake.
Three senior reinsurance industry underwriting sources told Reuters this week they had serious doubts about EQECAT's estimate and how the company had come to it. They all estimated the actual loss at $1 billion or less.
The quake was the third major one to hit New Zealand in nine months. Over that time, EQECAT has pegged the total insured losses at up to $23 billion. Government officials said this week that parts of Christchurch would have to be abandoned after the latest temblor.
EQECAT said on Friday it had arrived at the latest figure by answering three questions: the difference between Monday's quake in isolation and the impact if it had occurred at the same time as February's temblor; the effects of shaking on partly rebuilt buildings; and the type of disaster responses the quake generated that would increase insurance payouts.
Had the two quakes occurred roughly together, EQECAT said, the damage would have been about 10% greater than what was actually caused by the February event. That difference translates to about $1.5 billion in damages.
New damage to buildings and public works that had been partially but not fully restored likely generated another $1 billion to $2 billion in losses, the modeling firm said. Uncertainty in the way losses are processed and responded to, given the sequence of events, probably amplified the losses by another $1 billion to $2 billion, it added.
EQECAT is one of three companies relied on by global insurance firms to model losses and plan coverage. The others are AIR Worldwide Corp. and Risk Management Solutions Inc. Neither AIR nor RMS has released a loss estimate for the latest quake.
NEW YORK (Reuters)—A string of earthquakes in New Zealand is sending tremors through the global insurance market, with some companies delaying underwriting policies and others turning to capital markets to offset the risk of pile-on damages and costly claims.