The devastating M7+ earthquakes that occurred in Turkey on February 6th, 2023, are expected to drive economic losses of more than $20 billion, of which insurers and reinsurers will cover more than $1 billion, according to Verisk’s Extreme Event Solutions.
At least 37,000 lives have been lost following the M7.8 earthquake, which occurred in the vicinity of a triple-junction between the Anatolia, Africa, and Arabian tectonic plates, and the M7.5 quake, which occurred nine hours later to the north on a separate but connecting fault.
“These devasting earthquakes caused not only extensive physical damage, but also a tragic loss of life in Turkey and Syria,” said Bill Churney, President of Extreme Event Solutions.
The company’s modelled insured loss estimate for the earthquakes includes damage from ground shaking induced insured physical damage to onshore property, both structures and their contents; and loss of use coverages such as business interruption.
At the same time, the insured loss estimate excludes losses due to fire-following, liquefaction, or sprinkler leakage; loss adjustment expenses; losses to uninsured properties; losses to infrastructure; losses from extra-contractual obligations; losses from hazardous waste cleanup, vandalism, or civil commotion, whether directly or indirectly caused by the event; losses outside of the model domain, including those in Syria; losses to civil engineering (railway) risks, marine cargo and marine hull risks, aviation risks; risks, transit warehouse risks, movable all risk, and personal accident risks; and other non-modeled losses.
Based on the available data, Extreme Event Solutions expects the total loss to exceed $20 billion, with insured losses likely to pass the $1 billion threshold.
This highlights the vast protection gap (disparity between economic and insured losses post-event) that exists in the region, with an expected $19 billion or more of the total loss not being covered by insurance, meaning that governments will foot the large majority of the bill.
“The sizable difference between insured and economic losses—the protection gap—represents the cost of catastrophes to society, much of which is ultimately borne by governments. Increasing insurance penetration can ease much of the burden. There are solutions available that can enhance global resilience efforts including, emergency management, hazard mitigation, public disaster financing, risk pooling, and other government-led risk- and loss-mitigation initiatives” added Churney.
According to the firm, since 1990, Turkey has experienced roughly 12 quakes of M5 and greater and one event of M6 and greater each year. And, although advancements have been made in the past two decades, history repeats in terms of damage between the 1999 M7.5 Izmit earthquake and the recent one, such as widespread pancake-type collapse for both old and new buildings.
This estimate from Extreme Event Solutions is in line with that of the US Geological Survey (USGS), which said soon after the quakes occurred that insured losses could hit $1 billion.
Analysts have since commented on the event, saying that reinsurers will likely absorb the majority of the insured losses, but that this would be minimal given the region’s low insurance penetration.