CoreLogic® estimates insurable loss in Ecuador earthquake to be up to $600 million
On March 18 at 1:12 p.m. local time (5:12 p.m. UTC), a magnitude (M) 6.8 earthquake occurred near the coast of Ecuador at a depth of 66 km (41 miles), according to the U.S. Geological Survey (USGS). Guayaquil, Ecuador is the closest major city, located approximately 72 km (45 miles) north of the epicenter.
RQE Model Users: Proxy Events and Modeled Insurable Losses
Clients who license the CoreLogic Latin America Earthquake Model on Risk Quantification & Engineering (RQE) can download proxy events from the stochastic catalog along with estimated modeled insurable losses from the Catastrophe Modeling Client Resource Center (CRC) at: https://crc.corelogic.com/.
Impact on Insurance Market
CoreLogic estimates that insurable losses from the Ecuador earthquake will be up to $600 million. Based on local reports, a large proportion of the damage in Ecuador occurred in buildings that would typically be uninsured. Combined with relatively low earthquake insurance penetration rates in Ecuador, it is unlikely that insured losses from this Ecuador earthquake will be material.
The CoreLogic insurable loss estimate includes damage to the building stock in Ecuador that is considered insurable and, therefore, does not account for earthquake insurance take-up rates or deductibles. The insurable loss estimate includes damages to buildings and contents for residential, commercial, industrial and agricultural structures in Ecuador. Estimates exclude any loss from damage to infrastructure, such as road and rail networks; water and electric power systems; and oil and gas. Loss estimates also exclude costs associated with additional living expenses, business interruption and contingent business interruption. Demand surge is also not included.
As of Monday, March 20, approximately 5.7 million people experienced strong to very strong ground shaking with Modified Mercalli Intensity (MMI) scale values of VI to VII, according to the USGS PAGER. Strong ground shaking can cause slight damage to contents and plaster. Very strong ground shaking can cause slight to moderate structural damage in well-built buildings and considerable damage in poorly built or badly designed structures.
Approximately 2 million people felt strong ground shaking of MMI VI in Guayaquil (Figure 1).
Figure 1: Ground Shaking Map of the March 18 M6.8 Earthquake
Damage, Loss and Impact on Earthquake Insurance Market
CoreLogic does not expect a significant amount of insured loss from this Ecuador earthquake due to a lack of insured properties in the most affected areas.
A large proportion of structures in the region at risk of severe ground shaking from the M6.8 earthquake are highly vulnerable to shaking-related damage. According to the USGS PAGER, the predominant building types are mud wall structures and reinforced/confined masonry constructions.
The total economic loss from the M6.8 earthquake may be quite substantial due to the vulnerable nature of the predominant construction types in addition to the impact on critical infrastructure (e.g., road closures, damaged power, water or communication lines). According to the USGS, estimated economic losses will be less than 1% of the Ecuador Gross Domestic Product (GDP).
Any use of the word “event” does not correspond to an “insured event” definition.
According to the USGS, the M6.8 earthquake occurred as a result of oblique faulting where the Nazca Plate subducts beneath the South America Plate. The Nazca Plate moves east, relative to the South America Plate, at a rate of 73 millimeters per year. The USGS classified the M6.8 earthquake as an intermediate-depth event, indicating that deformation occurred within the subducted slab instead of at the shallow plate interface. The location of the deformation may have limited the severity of the earthquake-related damage.
Earthquakes are common in this region of Ecuador. According to the USGS, 32 earthquakes of M6.0 and greater have occurred over the last 100 years within 250 km (155 miles) of the March 18 M6.8 event. Most notable was the 2016 M7.8 earthquake which resulted in more than 700 fatalities.
The CoreLogic Event Response team continues to monitor the developing situation in Ecuador.
Visit www.hazardhq.com for updates on the March 18 M6.8 earthquake and information on future catastrophes around the globe.