Insured loss estimates for New Zealand quake up to $12bn

This is the reported amount estimated by an analyst at JP Morgan in a note to clients. AIR Worldwide believes the figure will be slightly lower and will likely range between $8bn and $3.5bn. It is the second major earthquake to hit the city in six months following a 7.0 shock in September of last year. Both AIR and Risk Management Solutions (RMS) have reported that the most recent event will cause more damage than the first, because it occurred closer to the centre of Christchurch and at a more shallow depth. Worryingly for commercial insurers and business hardest hit was the city's central business district, which remains largely shut down. Rows of masonry buildings crumbled and those buildings still standing will have to be carefully assessed for structural integrity, according to AIR. hideIf the insurance costs were to reach the $12bn mark it would make the loss the most expensive natural disaster event for insurers since Hurricane Ike, according to the Insurance Information Institute, a New York-based trade group. It would also make it the seventh most costly since 1970. Fatalities from the trembler that struck on the South Island on 22 February currently stand at 98, however this number may rise as hundreds of people remained trap in the immediate aftermath. Based on information from the United States Geological Survey (USGS), an estimated total of 712 000 people across New Zealand were exposed to the shake—with 320 000 feeling the effects of severe shaking. According to the USGS, the recent earthquake occurred as part of the aftershock sequence of the Darfield, Canterbury earthquake in September, although there is no specific structure linking the two events. Whilst damage assessments are in their infancy initial reports indicate the level of damage is severe in Lyttelton, a port town six miles south-east of Christchurch. Buildings in Christchurch itself have also sustained ‘significant’ structural damage, observers say. According to the modeling firms the most fragile buildings in the city were already damaged in September. But with extensive damage from that event only partially repaired many buildings were in a more vulnerable position than normal. “Christchurch is New Zealand’s second largest city, and while design requirements for new construction are stringent, many historical buildings dominate the central business district, and they are predominantly of masonry construction,” said Dr Arash Nasseri, engineer at AIR Worldwide. “Few have undergone seismic retrofit. Structures may also have been weakened by the magnitude 7.0 earthquake that took place in early September of last year.” According to the modeling firm, the city’s infrastructure has also been hard hit, with many roads and bridges damaged as a result of liquefaction. In the city’s suburbs and surrounding towns, ground failure manifested in the form of liquefaction, lateral spreading and landslides. The government-backed Earth Quake Commission (EQC) scheme covers most residential properties in New Zealand. It insures losses of up to $100,000 New Zealand for structural damage and $20,000 New Zealand of contents cover. The private market extends coverage for residential properties above the EQC limits for both buildings and contents. It also provides coverage to commercial and industrial properties. RMS expects that where dwellings have been severely damaged by the ground shaking, the repair and reconstruction costs will exceed the EQC ‘first loss’ limits of the EGC cover. Almost all industrial and commercial policies are written on an all risks basis and most policies include full value earthquake cover. Private insurers therefore are predominantly expected to play a major role in the repair of the commercial properties affected by the earthquake.

Insured loss estimates for New Zealand quake up to $12bn

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