Turkey-Syria earthquake insured losses could reach $1bn: Fitch

Insured losses from the earthquakes in Turkey and Syria are likely to be around $1bn, with most of the cost falling on global reinsurers, according to Fitch.

It said economic losses from the tragedy, which has now claimed more than 20,000 lives, are still hard to estimate because the situation is evolving. But Fitch thinks overall losses are likely to exceed $2bn and could be more than $4bn.

Fitch said insured losses “could be much lower, perhaps around $1bn, due to low insurance coverage in the affected regions”.

It added that the vast majority for insured losses will be covered by global reinsurers. However, the total loss is likely to be “insignificant” for the global reinsurance market, with no rating implications, said Fitch.

The agency said insurance coverage will be low in most parts of Turkey and Syria affected by the earthquakes.

The Turkish Catastrophe Insurance Pool (TCIP) was created after the Izmit earthquake of 1999 to cover damage to residential buildings in urban areas. However, it does not cover human losses, liability claims or indirect losses, such as business interruption.

Fitch said earthquake insurance is technically mandatory in Turkey but is very often not enforced in practice.

“As a result, many residential properties are not insured, particularly in many of the affected areas, where low household incomes constrain affordability,” said Fitch.

It added that insurance coverage in the affected parts of Syria is likely to be similarly low, particularly given the economic effects of the country’s civil war.

Fitch explained that the TCIP is heavily reinsured. It estimates that its reinsurance tower provides protection of just over $2bn following the January 2023 reinsurance renewals, with an attachment point of around $300m.

Fitch said local and international commercial insurers that provide property and business interruption policies to industrial clients in the region will face claims. It explained that factories and infrastructure, including airports and ports, have been severely damaged. Fitch assumes that these covers are also heavily reinsured.

It does not expect catastrophe bonds to be significantly affected because the earthquake risk they cover in the region is mostly limited to Istanbul.