Reinsurance News

Turkey earthquakes insured loss pegged at $3.5bn by PERILS

21st March 2023 - Author: Kane Wells

Zurich-based catastrophe insurance data provider PERILS has released its first estimate of industry loss from the recent Kahramanmaras Earthquake Sequence that hit Turkey and Syria, placing it at $3.5 billion (TRY 65.4 billion).

A Mw 7.8 magnitude earthquake struck south-central Turkey near the Syrian border On 6 February 2023.

The earthquake initiated at a shallow depth of 10km, at the southwestern end of the East Anatolian fault system.

It produced a surface rupture length of approximately 250km. 11 minutes after the first shock, a Mw 6.7 aftershock occurred.

Nine hours later, another powerful Mw 7.5 earthquake struck 95km to the north, on an adjacent but separate fault also within the East Anatolian fault system.

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This second earthquake initiated at a depth of 15km and produced a surface rupture length of approximately 90km.

Eleven provinces in south-eastern Turkey were impacted by the earthquake sequence, with Hatay, Kahramanmaras, Gaziantep, Malatya and Adiyaman being the worst affected.

According to the latest official figures, over 56,900 deaths were reported, 48,448 in Turkey and 8,476 in Syria, while estimated 2.4 million people were displaced from their homes.

PERILS states that in Turkey, more than 160,000 buildings containing 520,000 apartments were destroyed, damaged or will need to be demolished, with more that are partially damaged and will need to be repaired.

A recent study by the Department of Economics of the Koç University put the economic losses in Turkey in the range of $70bn-87bn.

Meanwhile, analysts at the World Bank have estimated that the earthquake sequence will result in some $34 billion of economic costs, based on direct physical damages.

In terms of insured losses, PERILS states that the TRY 65.4bn ($3.5bn at exchange rates) industry loss represents the costliest catastrophe event in Turkey’s recorded history.

This sits somewhat below the estimates from risk modeller Moody’s RMS and data analytics firm CoreLogic, who both pegged insured losses at $5 billion.

Though, it aligns closely with global reinsurance firm Hannover Re, which estimated the quakes were a $3.5-4 billion industry loss event.

PERILS notes that the loss number is in line with its coverage definition for Turkey and covers the property line of business. It does not include losses which occurred in Syria, as this region is not covered by the firm.

Luzi Hitz, CEO of PERILS, commented, “First and foremost, I would like to express our deepest sympathies to those affected in the Republic of Türkiye and the Syrian Arab Republic by this incredibly tragic and truly devastating event.”

Hitz continued, “Shallow earthquakes of magnitudes Mw 7.8 and Mw 7.5 cause severe devastation in any built environment. Although the insurance industry in Turkey offers protection for the financial consequences of such events, the take-up rate remains low, or the coverage limits purchased are far below reconstruction costs.

“Earthquake insurance is not only a challenge in Turkey, but also in other regions exposed to high seismic activity such as Japan or California, where insurance penetration for the peril remains low.

“Through providing our industry loss data our aim at PERILS is to help improve understanding of such highly destructive perils and by so doing facilitate the increased penetration of insurance solutions into these earthquake-exposed territories.”

The firm anticipates that an updated estimate of the market loss from the Kahramanmaras Earthquake Sequence will be made available by 6 May 2023, three months after the event.

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