Insured losses from Chilean earthquake estimated at between US$600-900 million: AIR Worldwide

Catastrophe modelling firm AIR Worldwide estimated on Monday that insured losses from the magnitude 8.3 earthquake that struck Chile’s central coast near Illapel on Sept. 16 will be between US$600 million and US$900 million.

Authorities have stated that at least 12 people have died as a result of the quake, which was felt as far away as São Paulo, Brazil, more than 3,000 kilometres away, AIR Worldwide said in a statement. Strong shaking was also felt in Chile’s capital city of Santiago, the nation’s most populous city, where tall buildings swayed for up to three minutes.

“The main shock, which was followed by several strong aftershocks, triggered a tsunami that was recorded in several countries,” said Dr. Mehrdad Mahdyiar, vice president and senior director of earthquake hazard research at AIR Worldwide, a Verisk Analytics business, in the statement. “The tsunami produced waves up to one metre in height as far away as the Hawaiian Islands.”

The port city of Coquimbo reported the highest tsunami wave at nearly five metres; debris and fishing boats washed inland into the downtown area, where homes and businesses were inundated. The town of Illapel, located directly east of the quake’s epicenter, suffered the heaviest damage resulting from strong ground motion, the statement added.

According to ONEMI (Oficina Nacional de Emergencia del Ministerio del Interior y Seguridad Pública), the Chilean agency responsible for public safety and emergency response, more than 400 residential buildings have been destroyed. In addition to these, more than 700 residential buildings sustained major damage.

Chile is the world’s leading producer of copper, and several mines were affected by ground shaking caused by the quake.

Daylight reveals the damage from Chile’s 8.3-magnitude earthquake http://t.co/tAyHZwXwej pic.twitter.com/XToYyuHOlZ

— Mashable (@mashable) September 17, 2015

Dr. Mahdyiar explained that the earthquake was the result of convergence between the Nazca and South American tectonic plates. “Here, the Nazca plate plunges beneath the South American plate, forming a subduction zone,” he said. “Active subduction zones are some of the most likely plate interfaces to generate quakes of catastrophic magnitude and also pose the greatest risk of triggering tsunamigenic tectonic events.”

“The 2010 M8.8 Maule earthquake released a significant amount of accumulated energy and reduced the seismic risk offshore of Santiago, but increased the risk along the northern segment of the subduction,” Dr. Mahdyiar added.

The rupture area and the slip distributions of the recent earthquake and that of the 2010 Maule earthquake suggest that a small part of the Nazca subduction zone south of the rupture area of this recent earthquake and north of the rupture area of the Maule earthquake did not rupture during these two earthquakes and should be at a higher state of stress, thus increasing the likelihood of a future earthquake. This segment of the Nazca plate experienced partial or full ruptures during the 1906 M8.2 and 1985 M7.98 earthquakes and is capable of producing an M7.5 to M8.0 earthquake, AIR reported.

The location and magnitude of this earthquake are consistent with AIR’s recent seismicity model for this region. “AIR’s time-dependent model for this region estimates a higher rupture probability for this type of earthquake compared to the corresponding time-independent estimate,” the statement added.

AIR’s estimates are based on assumptions about take-up rates in Chile (the percentage of properties actually insured against the earthquake peril), about which there is considerable uncertainty. The US$600-900 million range in loss estimates reflect uncertainty in the slip distribution at the fault, modelled ground motion, tsunami inundation, and damage estimation.

The assumed exchange rate is 1 Chilean Peso (CLP) = 0.0015 US$.

AIR’s insured loss estimates reflect insured physical damage to onshore property (residential, commercial/industrial), both structures and their contents, and auto, as well as direct business interruption losses. The loss estimates do not reflect losses to uninsured properties; losses to land or infrastructure; indirect business interruption losses; loss adjustment expenses; losses from non-modelled perils, including fire-following and landslide; or demand surge – the increase in costs of materials, services, and labour due to increased demand following a catastrophic event.