Verisk estimates Venezuela quake losses above $10bn

Verisk has estimated that economic losses from the 24 June Venezuela earthquake sequence will likely exceed $10bn.

The catastrophe modeller and risk solutions group said there is a higher degree of uncertainty than usual around the insured share of losses.

Verisk said this reflects Venezuela’s macroeconomic conditions, elevated inflation, low insurance penetration and sanctions-related market complexities.

The earthquake sequence began with a rare doublet near Yumare-Morón in Yaracuy state, around 100 miles west of Caracas.

A magnitude 7.2 foreshock was followed 39 seconds later by a magnitude 7.5 mainshock.

Verisk said this made it the strongest earthquake to affect Venezuela since 1900.

The shallow strike-slip rupture occurred along the San Sebastián fault system, within the tectonically active boundary zone between the Caribbean and South American plates.

More than 430 aftershocks were subsequently recorded, the cat modeller observed.

Damage was most severe in the Caracas metropolitan region and the coastal state of La Guaira, where an estimated 1,400 buildings were destroyed.

Significant destruction was also reported across Aragua, Carabobo and Yaracuy states.

Verisk said communities including Puerto Cabello, Catia La Mar, Maiquetía, San Felipe, Los Teques, Petare, Valencia and Baruta experienced severe shaking, based on US Geological Survey intensity estimates.

The company said estimating insured losses is more uncertain than usual because of Venezuela’s economic environment.

Key factors include earthquake insurance take-up rates, ongoing inflationary pressures and the difficulty of valuing insured assets in a rapidly changing economic environment.

Verisk’s modelled insured loss estimates exclude a range of losses, including fire following earthquake, landslides, sprinkler leakage, loss adjustment expenses, damage to uninsured properties or infrastructure, extra-contractual obligations, hazardous waste clean-up, vandalism and civil commotion.

They also exclude losses tied to civil engineering risks, marine cargo and marine hull, aviation, transit warehouse, personal accident and other non-modelled sources of loss.

Verisk said Venezuela’s urban residential building stock is largely masonry, including reinforced masonry, confined masonry and unreinforced masonry structures.

Reinforced concrete is the predominant construction type in mid-rise and high-rise residential buildings, particularly in major urban centres such as Caracas.

Although modern engineering standards exist, Verisk said seismic performance varies significantly due to construction practices, material quality and building code enforcement.

Venezuela’s re/insurance sector remains relatively small and concentrated compared with many global markets.

Verisk said the industry continues to operate under difficult macroeconomic conditions, including elevated inflation, currency depreciation, regulatory complexity and limited market capacity.

The cat modeller said variations in earthquake insurance penetration, coverage levels and insured property values could materially affect the final insured share of economic losses from the event.