A relatively high portion of losses caused by the earthquake that shook Turkey on February 6 are expected to be covered by insurance, according to Aon.
This is given penetration rates resulting from compulsory earthquake insurance – offered to the public via the Turkish Natural Catastrophe Insurance Pool (TCIP), which is reinsured.
The 7.8 magnitude earthquake that hit the southern Turkish affecting the city of Gaziantep, with deadly tremors also extending over the Syrian border into the provinces of Aleppo, Latakia, Hama and Tartus.
The first earthquake was followed by a second one less than 12 hours later, it measured at magnitude 7.7 which occurred slightly further north east, near the city of Kahramanmaraş.
According to the latest report of the Turkish Disaster and Emergency Management Presidency (AFAD) released on February 8, more than 9,000 people died and no fewer than 50,000 others were injured across the provinces of Kahramanmaras, Gaziantep, Sanliurfa, Diyarbakir, Adana, Adiyaman, Osmaniye, Hatay, Kilis and Malatya in Turkey.
Over 5,000 buildings collapsed and thousands more were damaged in those ten provinces. Local support teams together with international search and rescue teams include almost 100,000 persons who are working in the area.
In Syria, the situation is similarly disastrous, with collapsed buildings across the region and including the cities of Aleppo, Harim, Atmeh, Latakia and Hama that were probably the most affected by the earthquake.
As of February 8, the Syrian Ministry of Health and Syrian Arab News Agency (SANA) reported no fewer than 3,000 fatalities and more than 3,700 injured people.
On February 6, the World Health Organisation warned that a total death toll can possibly reach as high as 20,000 casualties due to continuing aftershocks and subfreezing conditions.
These catastrophic events caused thousands of fatalities and tens of thousands of injuries, as well as notable material damage in both countries. According to Aon, they are expected to pose the deadliest and the costliest events to hit the region of south Turkey in the modern era.
The USGS has suggested that there is a 78% chance that economic damages will rise above US $1 billion, although it is important to note that this guidance was issued before the occurrence of the second magnitude 7.7 earthquake.
Even though it is still too early to estimate the total economic and insurance impact of this significant event, Aon has suggested that Turkey’s state-backed pool will be able to take the brunt of earthquake losses as penetration rates in the affected area are close to 60%.
“Based on the widespread scope of extreme damage on property and infrastructure, it was initially anticipated that total economic losses would reach into the billions of USD,” said Aon.
“Relatively high portion is going to be covered by insurance. As the Natural Catastrophe Insurance Pool (DASK) noted, the take-up rate of the compulsory earthquake insurance scheme is approximately 52% in the Malatya Province, 45% in Adıyaman and 65% in Gaziantep.”
The catastrophe insurance pool has a claims paying capacity of nearly $2.5 billion, based on its 2021 reinsurance renewal.
Details of the more recent 2022 renewal have not been disclosed, but assuming the structure remains similar to previous years, then Munich Re and Swiss Re would have the biggest shares of the pool’s reinsurance tower, which attached at around US $260 million and covered losses to close to US $2 billion, with other major reinsurers from the London and Bermuda market also participating.
