Canadian Underwriter

At least US$350M in insured losses from Ecuador quake that killed more than 500: AIR

April 22, 2016   by Canadian Underwriter

Print this page Share

As Ecuador continues to suffer aftershocks from a major earthquake the evening of April 16, catastrophe modeling vendor AIR Worldwide estimates insured losses could exceed $1 billion.

iStock_000015637686_SmallIn an alert published Thursday, Boston-based AIR Worldwide said it estimates that industry insured losses from the April 16 quake – which measured 7.8 on the Richter scale – will be between US$325 million and US$850 million ($1.08 billion Canadian, using the exchange rate of $1.27 as of April 21).

“Total economic losses are expected to be much higher than industry insured loss estimates,” added AIR Worldwide, which is owned by Jersey City, N.J.-based Verisk Analytics Inc.

The death count rose to at least 587 on Thursday, The Associated Press reported.

“More than 1,100 buildings are reported to have been destroyed and more than 800 damaged,” said AIR Worldwide. “Other impacts include lack of running water, power, and communications systems.”

AIR noted that the Manta Airport was closed after a control tower collapsed.

Related: Earthquake kills 235 in Ecuador

“AIR’s estimates of insured losses are based on assumptions about take-up rates in Ecuador (the percentage of properties actually insured against the earthquake peril), about which there is considerable uncertainty,” the company added.

AP quoted President Rafael Correa as saying sales taxes would increase from 12% to 14% for the coming year.

People with more than $1 million in assets will be charged a one-time tax of 0.9% of their wealth, AP added.

AIR noted that the oil refinery in Esmeraldas – the nation’s main crude oil processing plant – was not damaged but closed as a precaution. That plant produces 110,000 barrels of crude per day, AIR added.

The April 16th earthquake occurred at 7:58 p.m. eastern time, as the result of “shallow thrust faulting on or near the plate boundary between the Nazca and South America plates,” the United States Geological Service stated.

At the epicentre – 68 kilometres south southwest Propicia – “the Nazca plate subducts eastward beneath the South America plate” at a speed of 61 millimetres per year, USGS added.

“The location and mechanism of the earthquake are consistent with slip on the primary plate boundary interface, or megathrust, between these two major plates,” USGS said.

USGS recorded several aftershocks, including four April 21-22: a Magnitude 4.8 at 4:52 a.m. Eastern Friday; a Magnitude 5 at 12:31 a.m. Eastern Friday; a Magnitude 5.8 at 11:20 p.m. Eastern Thursday; and a Magnitude 6 at 11:03 p.m. Eastern Thursday.

Related: Major commercial buildings, seaside hotels in Ecuador likely of concern to insurance industry following earthquake: RMS

Since 1900, there have been seven earthquakes at 7.0 or greater within 250 kilometres of the April 16 quake, USGS stated. One of these, on Jan. 31, 1906, caused a tsunami that killed between 500 and 1,500 people. On March 6, 1987 a 7.2 earthquake killed about 1,000.

In South America, inter-plate earthquakes are frequent, USGS noted, adding the largest instrumentally recorded earthquake in history – at 9.5 on the Richter scale – occurred May 22, 1960 in southern Chile.

That earthquake killed about 1,655, including 61 in Hawaii from tsunamis reaching heights of more than 10 metres, USGS reported. Puerto Saavedra, Chile was destroyed in 1960 by a tsunami that reached heights of more than 11 metres, USGS noted, adding there was $75 million in damage in Hawaii.

“The South American arc extends over 7,000 km, from the Chilean margin triple junction offshore of southern Chile to its intersection with the Panama fracture zone, offshore of the southern coast of Panama in Central America,” USGS explained. “It marks the plate boundary between the subducting Nazca plate and the South America plate, where the oceanic crust and lithosphere of the Nazca plate begin their descent into the mantle beneath South America.”