The two earthquakes that recently devastated south-east Turkey and northern Syria are likely to set back the region’s reinsurance industry for years, according to credit agencies.
Across the two nations, the 7.8 and 7.5 magnitude earthquakes left more than 40,000 people dead, more than 70,000 injured and at least 6,400 buildings destroyed.
Turkish authorities said 35,418 people had been killed as of Tuesday evening, while more than 5,800 people are dead in Syria, according to the UN and the Syrian government.
Fitch Ratings said the economic cost is likely to exceed US$2bn and could surpass US$4bn. However, it added, insured losses may only be around US$1bn due to low insurance coverage in the affected regions. Most insured losses will be covered by reinsurance, but the amount is likely to be insignificant in the context of the global reinsurance market, the agency said.
The Turkish Catastrophe Insurance Pool (TCIP), created after the Izmit earthquake in 1999 to cover earthquake damage to residential buildings in urban areas, does not cover human losses, liability claims or indirect losses such as business interruption. Fitch added that while insurance cover is technically mandatory in Turkey, it is often not enforced and many residential properties are uninsured – particularly in many of the affected areas, where household incomes are low. Insurance coverage in the affected parts of Syria is likely to be similarly low, in the context of the country’s civil war.
Fitch predicted that local and international commercial insurers providing property and business interruption policies to industrial clients in the region will face claims, as factories and infrastructure have been severely damaged.
Credit agency AM Best said that while international reinsurance markets are likely to pick up a proportion of the losses to partly protect the balance sheets of local reinsurers, the earthquakes “represent yet another headwind for a market already facing an extremely challenging operating environment, characterised by significant inflation and a weakening currency”.
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