17 January 2012, Zurich
Much of the world is still vastly underinsured against earthquake risk, study finds - Underinsurance often due to low risk awareness in earthquake-prone areas - Earthquake models should consider secondary-loss factors more comprehensively
According to Swiss Re’s latest expertise publication “Lessons from recent major earthquakes”, several big earthquakes resulted in a devastating number of fatalities and injuries and have caused widespread property damage over the past two years. The cumulative catastrophic impact of earthquakes on society is overwhelming. Seismic events caused economic losses of over USD 276 billion in 2010 – 2011, yet highly earthquake-prone countries remain underinsured.
Lucia Bevere, Senior Catastrophe Data Analyst at Swiss Re Economic Research & Consulting and co-author of the publication, says: “The insurance industry is playing a key role in post-disaster financing of the countries affected. While insurance cannot replace lost lives and livelihoods, appropriate insurance and other risk transfer mechanisms can greatly accelerate the recovery process.” However, the insurance industry’s contribution to the reconstruction effort differs dramatically from country to country.
The insurance industry will pay an estimated 80% of the overall cost of the February 2011 earthquake in New Zealand, but no more than 17% for the disastrous event in Japan in March 2011. Earthquake insurance penetration, in fact, is highest in New Zealand, and is very low in Japan, particularly for commercial properties.