Moody’s RMS Estimates $5B Insured Losses From Turkey Quake as Costs Keep Mounting

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The economic and insured losses from the earthquakes that hit southern Turkey on Monday, Feb. 6 continue to escalate as damage information and data keeps pouring in.

The catastrophe risk modeling firm Moody’s RMS estimated on Feb. 23 that economic losses from the earthquakes of 7.8 and 7.5 magnitude are likely to exceed US$25 billion (471 billion Turkish lira), while total insured losses are estimated at more than US$5 billion (94 billion Turkish lira), according to Moody’s RMS, the global catastrophe risk modeling and solutions company.

Just a week earlier on Feb. 16, Karen Clark & Co. estimated insured losses of $2.4 billion, while Verisk issued estimates of “more than US$1 billion” on Feb. 14.

Turkey Earthquakes to Cost Insurers $2.4 Billion: Karen Clark & Co.

In its market update, Moody’s RMS said its loss estimates reflect the impact of the earthquakes in Turkey and don’t include losses in Syria. The Turkish insured losses include those to private insurers as well as to the Turkish Catastrophe Insurance Pool (TCIP).

“Only around 20% of the $25 billion economic losses that RMS estimates will result from the earthquake in Turkey will be covered by the insurance sector, highlighting the vast protection gap that exists in the country. Moody’s expects reinsurers to absorb the bulk of the industry loss, which is relatively small in light of the devastation caused,” said Helena Kingsley-Tomkins, senior analyst, Moody’s Investors Service, in a statement accompanying the market update.

The Moody’s RMS loss estimates are based on an analysis of the earthquake sequence using its Europe Earthquake Models and reflect damage to property and contents as well as and business interruption, across residential, commercial, and industrial lines in Turkey. These estimates do not include post-event loss amplification or losses to non-modeled exposures such as transport and utility infrastructure.

The devastation from the earthquakes was widespread. Eleven provinces were severely affected by the earthquakes, and the damage was worst in Gaziantep, Hatay, and Kahramanmaraş, said Moody’s RMS, quoting the Turkish Ministry of Environment, Urbanization, and Climate Change.

As of Feb. 22, over 335,000 buildings are reported to have been damaged. “A unique contributor to the overall loss is that most of the economic losses due to shaking can be attributed to structures with severe damage that have either already collapsed or will require demolition,” Moody’s said.

(Editor’s note: The two quakes have killed nearly 50,000 people in Turkey and neighboring Syria. Two additional earthquakes of 6.4 and 5.8 magnitude struck Turkey’s southeastern Hatay province on Monday, Feb. 20, killing eight people in Turkey and Syria, according to news reports.)

“Observations from early damage reports issued by the Turkish Ministry of Environment, Urbanization, and Climate Change, and Turkish research reconnaissance indicate a systemic lack of adherence to seismic provisions, including government ‘amnesty’ programs that have allowed continued occupancy of structures that do not meet seismic design requirements,” Moody’s RMS said.

The modeling company anticipates that any tightening of the codes or more stringent enforcement will likely increase repair and rebuild times, especially as the number of destroyed structures is so extensive. The damage reports to date suggest that mid- and high-rise buildings are contributing significantly to the overall event loss.

The road to recovery in Turkey will take several years due to the scale of the damage and complex macroeconomic conditions that existed prior to the events, including significant inflation, which will hamper the reconstruction and add to the overall costs, said Moody’s RMS.

“The events highlighted the devastation that can arise when large magnitude events coincide with vulnerable building stock. We continue to learn from each significant earthquake, and the events in Turkey act as a wake-up call for other earthquake-prone regions, particularly concerning the true quality of the building stock,” said Laura Barksby, product manager, Moody’s RMS, in a statement.

Source: Moody’s RMS

Photograph: A man walks past debris from destroyed buildings in Antakya, southeastern Turkey, on Tuesday, Feb. 21, 2023. The death toll in Turkey and Syria rose to eight in a new and powerful earthquake that struck two weeks after a devastating temblor killed more than 45,000 people, authorities and media said. (AP Photo/Unal Cam)

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