Higher earthquake insurance penetration in Colombia is expected to mean the magnitude 7.4 quake that struck the country will generate an insured loss for the wider Latin American insurance market, according to global reinsurance broker Guy Carpenter, a Marsh business.
The earthquake struck western Colombia on 10 August, with its epicentre near San José del Palmar in the Chocó Department, around 250 miles west of Bogotá, at a depth of 107 kilometres.
Reports reveal that the event caused at least 181 deaths and widespread infrastructure damage, including six airport suspensions and initial reports of more than 150 buildings being toppled.
Colombia is among the most seismically active areas of South America and has recorded at least 14 earthquakes of magnitude 7.0 or greater. The latest earthquake follows major seismic activity in Venezuela in June, although the insurance implications are expected to differ between the two countries.
According to the company, insurance policies in Colombia can include comprehensive protection, with earthquake cover often available for an additional premium. The company said deductibles for earthquake cover commonly range from 5% to 20%.
Guy Carpenter’s assessment suggests that the level of earthquake insurance take-up in Colombia is a key factor in determining the event’s impact on the insurance market. With more property exposed to earthquake cover, a greater proportion of the damage from the Colombian earthquake is expected to translate into insured losses.
The reinsurance broker expects the stronger insurance penetration to result in an insured loss event for the Latin American marketplace. The ultimate scale of the loss remains uncertain, however, as assessments of damage to buildings and infrastructure are continuing.
Guy Carpenter’s analysis places the Colombian earthquake within a broader pattern of significant seismic activity across South America in 2026. While the physical consequences of the event are still being assessed, the company’s market analysis indicates that Colombia’s comparatively higher level of earthquake insurance coverage is likely to make the event more significant for insurers and reinsurers across the region.
AM Best, the global credit rating agency, has also commented on the earthquake, saying that it’s expected to drive claims across multiple lines of insurance business, notably from commercial and residential property.
However, AM Best expects low insurance penetration near the quake’s epicentre to limit overall industry exposure, but adds that the extent of damage in regions with high insurance penetration will be key in determining the ultimate insured loss.
In terms of the reinsurance industry impact, the ratings agency foresees no significant reaction from the market, but anticipates reinsurers paying close attention to how this event develops as they reassess their exposure to earthquake risk.
