NZ Earthquake

And so it was an earthquake, rather than a hurricane that fueled the catastrophe headlines of the long weekend.

A 7.0-magnitude earthquake that struck near Christchurch on New Zealand’s South Island early Saturday follows major earthquakes in Baja (California), Chile, Haiti and China earlier this year.

The blow to New Zealand’s second largest city underscores the key role played by insurers and reinsurers around the world in defraying the economic costs of disasters.

Damage was reported to be widespread but remarkably it appears there were no fatalities.

Catastrophe modeling firms have already begun to release estimates of industry losses.

AIR Worldwide estimates insured losses will be between NZD2.7 billion ($2 billion) and NZD6.0 billion ($4.5 billion). This estimate includes insured physical damage to residential and commercial/industrial property (structures and contents) and direct business interruption losses.

Risk Management Solutions (RMS) warns that this is likely to be the largest insured loss in New Zealand for many years.

According to New Zealand GNS Science this is the most damaging earthquake in New Zealand since the 1931 Hawke’s Bay earthquake that killed 256 and left thousands injured.

New Zealand’s Earthquake Commission (EQC), a state fund, is the primary provider of natural disaster insurance to residential property owners.

A Wall Street Journal report says the EQC currently has around NZ$5.6 billion and is backed by reinsurance from overseas groups and a government guarantee. It adds that this will be the single biggest claim on the fund since it was established in the 1940s.

RMS noted that commercial and industrial losses (covered by the private re/insurance market) will likely be less than half the total loss, given the nature of the exposure in the affected region.

Check out I.I.I. facts and stats on global catastrophes and earthquakes.

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