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Munich Re expects 6 Feb earthquakes to cost economic losses in the billions of dollars

It is still too early to estimate the total economic and insurance impact of this significant event. However, based on the widespread scope of extreme damage on property and infrastructure, it was initially anticipated that total economic losses will reach into the billions of US dollars, says global reinsurance giant Munich Re.

In its initial assessment of the Turkey-Syria earthquakes, Munich Re says that a relatively high portion is going to be covered by insurance. As the Natural Catastrophe Insurance Institution (DASK) noted, the take-up rate of the compulsory earthquake insurance scheme is approximately 52% in Malatya, 45% in Adiyaman and 65% in Gaziantep. These are three of the 10 southern provinces in Turkiye hit by the quakes.

The series of severe earthquakes struck southeastern Turkey close to the border with Syria on 6 and 7 February. The two most severe shocks reached magnitudes of 7.8 and 7.5 according to the United States Geological Survey (USGS). They were the most severe earthquakes to hit Turkey in decades. Many thousands of people died, and an enormous number of buildings were destroyed completely. Northern Syria was also very badly affected.

Turkey and neighbouring countries are highly exposed to earthquake hazards due to two active plate boundaries, the East Anatolian and the North Anatolian Fault Zones. The recent quakes occurred on the East Anatolian Fault, where the Anatolian block is pushed westward by the collision of the Eurasian and Arabian plates. Furthermore, the current events again showed the high vulnerability of the Turkish building stock.

In Turkey, after the 1999 earthquakes in Izmit and Düzce with more than 17,000 fatalities, an insurance pool was established by law in 2000 to mandatorily cover residential buildings against earthquake damage – the Turkish Catastrophe Insurance Pool (TCIP). As a result, the insurance density to cover homeowners against earthquake damage has increased to more than 50% countrywide.

The sum insured is currently limited to TRY640,000 ($34,000) per dwelling. International insurers and reinsurers are covering the lion’s share of the pool. Munich Re has been a long-standing partner of the TCIP and is also currently participating in the reinsurance programme.

Reliable estimates of the overall losses from the devastating earthquakes are not yet possible, nor for the insured losses. It is also still unclear which of the destroyed buildings are actually insured under the TCIP.

Munich Re also said, “Catastrophe pools like the one in Turkey are a useful way for many countries highly exposed to natural disasters to provide affordable insurance protection against the financial losses from a disaster. In addition, the construction of buildings in high-risk areas needs to become resilient enough to better protect people during disasters.”

The Natural Catastrophe Insurance Institution (in Turkish, Dogal Afet Sigortalari Kurumu [DASK]) is called Turkish Catastrophe Insurance Pool (TCIP) in English.



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