Sept. 7 Mexican quake could cost insurers up to $1 billionPosted On: Sep. 20, 2017 10:47 AM CST
Insured losses from the magnitude-8.1 earthquake that struck off the coast of the Mexican state of Chiapas on Sept. 7 will be between 14 billion Mexican pesos and 20 billion Mexican pesos ($792.4 million and $1.13 billion), catastrophe modeling firm AIR Worldwide said late Tuesday.
This comes as Mexico is now reeling from a second major quake that happened Tuesday afternoon in Mexico City, damage reports for which have yet to be issued.
The Sept. 7 earthquake was located about 600 miles from the capital, Mexico City, which did not experience major damage, although a highway under construction to the city’s new airport partially collapsed, AIR said in a statement.
The Mexican states of Oaxaca and Chiapas were hardest hit, according to AIR, with tens of thousands of homes damaged or destroyed, while in Chiapas, at least 98 health care facilities and 129 public buildings were damaged along with roads, highways, and bridges.
AIR, a Boston-based unit of Verisk Analytics Inc., said its loss estimates, which capture damage from ground shaking, include insured physical damage to onshore residential and commercial/industrial properties, including structures and their contents, and auto.
The firm added that its estimates of insured losses are based on assumptions about earthquake insurance takeup rates in Mexico, “about which there is considerable uncertainty,” the firm said, adding that total economic losses are expected to be much higher than industry insured loss estimates.
The range in AIR’s loss estimates also reflects uncertainty in the slip distribution at the fault, modeled ground motion and damage estimation, the statement said.
7.1-magnitude quake rocks Mexico City
Meanwhile, Tuesday’s quake was a magnitude-7.1 event that hit 30 miles south-southwest of Puebla City, Mexico, according to catastrophe modeler Risk Management Solutions Inc.
“There has been significant damage and loss of life, particularly in the capital of Mexico City and the states of Morelos and Puebla,” Newark, California-based RMS said in a statement early Wednesday, adding that 44 buildings have collapsed or suffered major damage according to the mayor of Mexico City, including a school, a supermarket, a factory and a six-story block of flats.
It is not yet known how many buildings in total sustained damage. The Roma district of Mexico City has been particularly badly affected, RMS said.
Morgan Stanley, in a research note Wednesday, said that global reinsurers are most likely exposed but that company disclosure is limited, noting that “only a very small proportion of homes purchase earthquake coverage; in California, the percent of homes with earthquake coverage is in the low single-digit range; in Mexico, sources indicate that it is even less.”
The note also pointed the cumulative effect of recent catastrophes in the region. “These devastating earthquakes add to the already high catastrophic losses from Hurricanes Harvey and Irma, heightening the industry loss for the year,” Morgan Stanley said in its note.
As many as 4.6 million buildings lost electricity, including 40% of homes in Mexico City, according to national power company Comisión Federal de Electricidad, RMS said, and gas mains in parts of Mexico City and other towns ruptured, sparking fires
Soldiers have been deployed to help search the rubble of collapsed buildings for survivors, and school classes have been suspended until further notice in Mexico City and the states of Mexico, Puebla, Morelos, Guerrero, Hidalgo, Veracruz and Tlaxcala, RMS said.
Eerily, the deadly quake occurred on the 32nd anniversary of a magnitude-8.0 earthquake that struck Mexico in 1985, killing up to 10,000 people and causing 400 buildings to collapse, RMS noted.
“Although the epicenter of yesterday’s earthquake was more than 100km away from the capital, and some 50km beneath the surface, we have seen many buildings collapse and a tragic loss of life,” Justin Moresco, an RMS specialist in earthquake risk models for Latin America, said in the statement.
“Ground motion amplification is likely to have been a major contributor to the damage caused yesterday, as it was during the magnitude 8 Michoacan earthquake, which devastated the capital on the same date in 1985,” he added.
No connection has immediately been established between the two quakes
“It will take further analysis before any seismological link between the two events can be established,” Mr. Moresco said.