Risk modellers put Mexico quake loss at USD4.8bn

The magnitude 7.1 earthquake that hit Mexico in September 2017 is estimated to have caused as much as USD4.8 billion of losses to insurance and reinsurance interests.

Risk modellers estimate diverge considerably though, with AIR Worldwide putting the industry loss at up to USD2.1 billion, RMS saying the re/insurance industry loss would not exceed USD1.2 billion, but the Mexico City headquartered seismic engineering specialists ERN International estimated the insured loss at up to USD4.8 billion.

ERN told Artemis that its estimate of insured losses from the M7.1 Puebla region and Mexico City earthquake is based on modelling of a portfolio of buildings representative of the size and distribution of insured buildings in the region. AIR’s and RMS’ loss estimates are based on their respective risk modelling platforms and exposure data as well.

The divergence in estimates highlights how difficult it can be making accurate assessments of the potential volume and amount of claims that insurance and reinsurance interests will be liable for so soon after an earthquake event. Earthquakes can be long-tailed, in terms of the development of claims and so the final costs to the industry will take some time to become clear.