Risk Management Solutions (RMS) has announced estimates that insured losses from the 2004 Southeast Asia earthquake and tsunami will be less than $4 billion, based on the information available within the first three weeks after the disaster. The disaster has primarily been a humanitarian one and, due to low insurance penetration in the impacted regions, is expected to have only a modest impact on the insurance industry, RMS said.
In a report issued to its clients this week, RMS outlined the impact of the earthquake and subsequent tsunami across multiple insurance lines, including:
* Property Insurance – Property claims constitute the majority of insured losses resulting from the disaster. Several forms of property have been affected, including local housing, motor vehicles, local fishing boats, yachts and cargo ships in harbors, industrial plants, coastal tourist hotels, and resorts. Total insured damage to property across all the affected countries is estimated to range from $2.5 to $3 billion.
* Life and Health Insurance – The largest insurance losses from life and health claims are likely to arise from foreign tourists affected by the event. Claims from local populations are expected to be small, due to low insurance penetration. Life and health insurance costs are estimated to be less than $1 billion.
* Travel Insurance – On average, 30 percent of European travelers vacationing overseas have travel insurance, but the demographics of travelers visiting the affected regions could represent higher than average insurance coverage. As many travel insurance policies include extensive coverage for medical treatment, these insurers could be significantly affected by the high number of injured travelers, as well as smaller claims for cancellations and lost belongings. Travel insurance claims are estimated to be around $100 million.
Occurring on Sunday, Dec. 26, the Southeast Asia earthquake was one of the largest earthquakes recorded in the last 100 years – a magnitude (moment magnitude, Mw) 9.0 quake on the interface of the India and Burma plates just to the west of northern Sumatra. At a depth of 10 km (six miles), approximately 1,000 km (620 miles) of fault ruptured to the north of the main shock, although almost all of the slip was concentrated in the first 400 km (250 miles).
The resulting large-scale, rapid disturbance of the sea floor triggered a devastating tsunami that spread east and west of the main fault rupture into the coastal regions of Sumatra, Thailand, Myanmar, southern India, Sri Lanka, and the Maldives. Further west, it caused damage in the Seychelles and eastern Africa. The tsunami was even detected in New Zealand and along the west coast of South and North America.
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