The insurance industry is unlikely to face large losses from a major earthquake that struck Haiti Tuesday, because many properties in the impoverished country lack insurance coverage, according to catastrophe modeler Risk Management Solutions.
“The impact to the insurance industry is likely to be limited given that insurance penetration in Haiti is very low, at around 0.28 percent of gross domestic product,” Risk Management Solutions said.
The earthquake was Haiti’s most powerful in more than 200 years, with a 7.0 magnitude. It destroyed the presidential palace, a United Nations building, schools, hospitals and countless other buildings.
Thousands are feared dead, and some have estimated the toll could reach the tens of thousands. The local Red Cross said it was overwhelmed. President Rene Preval said he did not know the death toll, but that “up to now, I heard 50,000 … 30,000.”
Haiti is the poorest country in the Western Hemisphere, and the earthquake’s epicenter was just 10 miles from the capital of Port-au-Prince.
The risk assessor Eqecat said “even well-designed buildings could expect damage from this event,” adding that buildings in the region “tend to be built with heavy materials (concrete, masonry) and with little or none of the lateral reinforcing needed for earthquake resistance.”
Risk Management Solutions added that about 90 percent or more of Haiti’s insured risks are in Port-au-Prince.
Aon Corp., one of the world’s largest insurance brokers, said economic losses for the region’s poorest country were expected to be high. It had no immediate estimate of insurance losses.
Wednesday, the Caribbean Catastrophe Risk Insurance Facility said it would pay out $8 million, the full policy limit, to Haiti based on preliminary data of the location and strength of the earthquake.
Germany’s Hannover Re said it expects a 20 million euro ($29 million) loss from the earthquake.
American International Group Inc. had no immediate comment on its exposure, while Chubb Corp. did not immediately return a call seeking comment.
Insured losses for catastrophes regularly reach into the billions of dollars in more heavily-insured areas.
In 2005, Hurricane Katrina led to more than $40 billion of claims, making it the industry’s most costly natural disaster.
The attack on New York’s World Trade Center in September 2001 cost insurers up to $60 billion.
(Reporting by Jonathan Stempel and Lilla Zuill; editing by Maureen Bavdek, Lisa Von Ahn, Richard Chang and Carol Bishopric) (1 euro = US$1.451)
Editor’s Note: For a list of organizations working to help the people of Haiti: http://www.interaction.org/crisis-list/earthquake-haiti