New estimate of the insured loss from Earthquake in Türkiye & Syria

PERILS has disclosed its initial industry loss estimate for the Kahramanmaras Earthquake Sequence which caused widespread devastation across several regions of Türkiye and Syria on 6 February 2023.

PERILS’ initial estimate of the insured market loss, based on loss data collected from the Turkish insurance market, is TRY 65.4 billion.

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

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.

New estimate of the insured loss from Earthquake in Türkiye & Syria

The Kahramanmaras Earthquake Sequence of 6 February 2023, Modified Mercalli Shaking Intensity: A series of earthquakes along the EastAnatolian fault system caused widespread devastation and enormous human suffering in south central Turkey and neighbouring Syria (see How Earthquakes in Turkey & Syria Impacts for Re/Insurance Industry?).

Out of the estimated economic costs of USD 70bn to 87bn, PERILS estimates in its initial loss report that TRY 65.4bn (USD 3.5bn based on exchange rates as of 6 Feb 2023) are covered by insurance.

The Kahramanmaras Earthquake Sequence of 6 February 2023, Modified Mercalli Shaking Intensity
The Kahramanmaras Earthquake Sequence of 6 February 2023, Modified Mercalli Shaking Intensity

On 6 February 2023, at 04:17 local time (01:17 UTC), a Mw 7.8 magnitude earthquake struck south central Turkey near the Turkey/Syria border. The earthquake initiated at a shallow depth of 10km, at the south-western end of the East Anatolian fault system. It produced a surface rupture length of approximately 250km.

The estimated insurance claims bill from the sequence of earthquakes that hit Turkey and Syria earlier in February appears to be growing as more is learned about the extent of the damage it caused, according to S&P Global Market Intelligence.

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

The level of human suffering and loss of life was immense – according to the latest official figures over 56,900 deaths were reported, 48,448 in Turkey and 8,476 in Syria, as buildings collapsed at a time when most were at home sleeping. Close to 130,000 people were severely injured. An estimated 2.4 million people were displaced from their homes and are currently living in tents and temporary shelters due to the event.

Economic losses in Turkey are likely to top $25 billion compared with earlier predictions of about $20 billion.

The insured loss for Turkey could exceed $5 billion, risk modeling company RMS estimated, after earlier estimates had converged around the $2 billion mark.

The quakes have killed 42,510 people in Turkey, according to the latest update from the country’s Disaster and Emergency Management Presidency, and RMS said over 335,000 buildings had been reported damaged.

The United States Geological Survey now estimates that the initial magnitude 7.8 earthquake will trigger economic losses of 1% to 10% of Turkey’s GDP, up from an earlier estimate of 0% to 6%.

In Turkey, according to official figures, more than 160,000 buildings containing 520,000 apartments were destroyed, damaged or will need to be demolished. Many more are partially damaged and will need to be repaired.

Turkey’s high inflation, which stood at 64.27% in 2022 according to the Turkish Statistical Institute, is complicating insured loss estimates. As of Feb. 24, US$1 was equivalent to 18.88 Turkish lira.

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.

Luzi Hitz, CEO of PERILS

A recent study by the Department of Economics of the Koç University put the economic losses in Turkey in the range of USD 70bn to 87bn. In terms of insured losses, the TRY 65.4bn industry loss represents the costliest catastrophe event in Turkey’s recorded history (USD 3.5bn at exchange rates of 6 Feb 2023).

New estimate of the insured loss from Earthquake in Türkiye & Syria

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.

Munich Re and Swiss Re had the highest shares of the program, the report said. Munich Re pointed assessment of the catastrophe, which said international insurers and reinsurers cover “the lion’s share” of the pool and confirmed that the reinsurer is a current participant on the program.

Insured losses appear to be an unusually small fraction [of the overall loss] compared to other natural catastrophes, adding that the company had been in touch with TCIP and primary insurers but was not able to quantify losses yet.

Yana Keller   by Yana Keller