Following the recent earthquake in Chile and with continuing aftershocks, Stephen Jackson, Managing Director Latin America, Cooper Gay, comments today on the likely impact on the (re)insurance markets.
“Current estimates of the anticipated insured losses range from between $2 billion to $8 billion. If, as seems likely, the losses come in at between $3 – $5 billion then the earthquake will comfortably overtake Hurricane Wilma in 2005 as the most expensive insured event ever to hit Latin America. “Hurricane Wilma was very specific to the Cancun region in Mexico and largely affected coastal, hospitality related properties. Chile on the other hand has been hit by an earthquake that covers a much wider area (900 square miles) and has destroyed a much broader spectrum of property. Chile is also one of the most developed nations in Latin America with relatively high insurance penetration and a high percentage of homeowners buying specific quake insurance for their properties.
“From a (re)insurance perspective, Wilma inflicted large local losses to the insurance industry but the knock-on to the reinsurance industry was restricted to a few treaty programmes only with little FAC bought. “Chile however, with up to 75% of the event reinsured, will see significant FAC and treaty losses. With a developed insurance market, international insurers have a big presence in Chile and we could potentially see their global programmes hit. Whether it’s a market changing event will depend on whether losses creep up. If $8 billion becomes the final figure, we could see an impact on regional Latin American programmes, while if the estimates remain at the lower end ($2 billion) it’s likely to be a more localised impact.
“The imperative now is to get money to where it is needed very quickly. This is an opportunity for the reinsurance industry, and particularly Lloyd’s and London, to show what they can do. If an insurer’s primary layer has been significantly exceeded, we shouldn’t be wasting time flying out loss adjusters to assess loss levels, we should be paying claims quickly. Supporting cedants in this difficult time and demonstrating the experience and quality of Lloyd’s and the London market is not only the right thing to do but it will once again underline the strength, experience and capacity of this market.”