The Caribbean Catastrophe Risk Facility (CCRIF) will pay out under $8 million in response to the 7.1 magnitude earthquake that devastated Haiti yesterday.
Yesterday’s earthquake was large enough to trigger the full limit of Haiti’s earthquake policy. The claim is approximately 20 times Haiti’s annual premium for earthquake coverage of $385,500, according to the CCRIF.
The reason insured losses may dwarf real losses for Haiti is the low take up of earthquake coverage in the island nation, according to several catastrophe modeling firms.
A release from RMS explains that Haiti is one of the smallest insurance markets in the Americas, with a total non-life premium income of just under $20 million and insurance penetration at around 0.3 percent of GDP.
“The majority of Haiti’s insured risks are situated in Port-au-Prince, and motor insurance accounts for 50 percent of all non-life premiums,” the RMS statement said.
Added to the mix is the fact that Haiti’s buildings are poorly constructed, said Dr. Guillermo Franco, senior research engineer at AIR Worldwide, in a statement.
“The building inventory in Haiti is dominated by concrete block (unreinforced masonry) construction, which has minimal lateral reinforcement,” Franco said. “Vulnerability is further exacerbated by Haiti’s poverty; residential construction, in particular, is of poor quality.”
Even though insured buildings have higher construction standards, the strength of yesterday’s quake could even overcome those reinforcements, according to a statement from EQECAT.
“Due to expected better underwriting standards than general building standards, insured buildings will generally perform better than the typical building, but this earthquake is very severe, and even well-designed buildings could expect damage from this event,” the modeling firm said in a statement to clients.
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