Thousands of buildings have been destroyed and over 1,000 deaths have been recorded in Turkey and Syria following two powerful earthquakes, which could result in more than US $1 billion of losses, according to the US Geological Survey (USGS).
The first quake was recorded at magnitude 7.8 on the Richter scale and struck in the early hours of this morning near the city of Gaziantep in south-eastern Turkey, with deadly tremors also extending over the Syrian border into the provinces of Aleppo, Latakia, Hama and Tartus.
Less than 12 hours later, a second earthquake measured at magnitude 7.7 then occured slightly further north east, near the city of Kahramanmaraş.
The official combined death toll across Turkey and Syria from both quakes has already exceeded 1,200, with thousands more injured. These figures are expected to climb much further still as rescue operations continue.
The earthquake is one of the largest ever recorded in Southern Turkey, although the region is particularly seismically active.
Turkey’s President Erdoğan has described the quakes as the country’s largest disaster since 1939, when the Erzincan earthquake left nearly 33,000 people dead and some 100,000 injured.
The USGS notes that the population in the areas hit by today’s earthquakes “resides in structures that are extremely vulnerable to earthquake shaking, though some resistant structures exist.” It adds that: “The predominant vulnerable building types are unreinforced brick masonry and low-rise nonductile concrete frame with infill construction.”
With this in mind, analysts at the USGS have 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.
Steve Bowen, Chief Science Officer at reinsurance broker Gallagher Re, reflected that a comparable magnitude 6.7 earthquake resulted in losses of around $600 million when it impacted the same region in January 2020.
But it’s thought that any losses to the re/insurance industry will be much lower, given the level of insurance penetration in the affected countries.
In Turkey, compulsory earthquake insurance is offered to the public via a catastrophe insurance pool, which 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.
If losses do exceed the $1 billion level, which seems more likely following the second large quake, then it seems there is a good chance that at least some of the losses will flow through to reinsurers via this arrangement.
As reported by our sister publication, Artemis, there are also some retro catastrophe bonds that feature Turkish earthquake risk as one of the perils covered, but fund manager Plenum Investments has assured that today’s events are “unlikely to have a noticeable impact” on the performance of these bonds.
“Earthquake in Turkey is only a marginal component of the CAT bond market in some retrocession covers,” Plenum explained. “The affected provinces are far from the large concentrations of value and population in Turkey, so the damage is unlikely to be sufficient to trigger claims payments from these transactions.”
According to Turkey’s authorities, more than 9,000 people are involved in the rescure mission to extract people from the rubble of collapsed buildings, but some commentators have noted that a number of factors could hinder these efforts.
One major consideration is the early hour at which the first quake struck, meaning many people were asleep and in the homes, while cold weather also means that those trapped could die from exposure while awaiting rescue over the coming days.
And the challenge of recovery and care for those affected will of course be further complicated by the large numbers of people already displaced in northern Syria as a result of the civil war.
Emergency responders from the Syrian Civil Defence have described “a catastrophic situation with buildings collapsed or suffering major cracks, hundreds injured and stranded, dozens dead and a lack of services as well as safe shelters and assembly points in stormy and snowy weather conditions and low temperatures”.