Record property losses from China quake
London, 15 May: The earthquake which hit China this week is likely to cause up to $1 billion of insured property losses – the highest in the country to date, according to calculations by US catastrophe risk modelling firms.

The Chinese government confirmed the death toll at 19,500 today, but state media said more than 50,000 may have died.

Risk Management Solutions (RMS) estimated that the magnitude 7.9 earthquake in Sichuan province would result in $10-15 billion of property losses. Although only a fraction of this loss will be borne by the insurance industry, the California-based company said, it is likely to break the record for insurance claims from a single event in China.

Boston-based AIR Worldwide predicted insurers could face claims of up to $1 billion while total property losses from residential, commercial, industrial and construction could reach $20 billion.

“Though the earthquake was centred in a relatively sparsely populated area, it was powerful enough to cause damage in Chengdu – 90 kilometres from the epicentre and China’s 10th largest city by GDP,” said RMS. AIR said there were no reports of collapsed buildings in the city and the high-rise office buildings appear to be unscathed, but older buildings did suffer damage.

AIR cautioned that there is a high level of uncertainty in insured loss estimates in China, since insurance penetration is generally low. RMS said that insurance penetration varies by line of business, ranging from negligible for residential property, over 50% for high-end commercial buildings in Chengdu and full coverage for the industrial facilities owned by multinational companies.

RMS noted: “Infrastructure damage and interruption to economic activity caused by the earthquake will amplify the total loss, as the full financial impact of the disaster unfolds.”