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Chilean Earthquake: Three Years On

Chilean Earthquake: Three Years On On 27 February 2010 the fifth most costly Earthquake on record hit the central coast of Chile.  It was the biggest natural disaster that the Chilean general insurance market has ever had to face with the risk sector paying out claims worth approximately US$8billion. 

The 8.8-magnitude earthquake was one of the most powerful quakes in recorded history, killing hundreds, destroying vast swaths of commercial infrastructure and causing damage to more than a million homes.

Chile is no stranger to violent earthquakes. Located along the Pacific Ring of Fire, one of the most active seismic zones on the planet, the country has experienced no fewer than 13 quake events of magnitude 7.0 or more over the last four decades. But the 8.8 magnitude earthquake, which affected about two million people, was a rare occurrence because earthquakes more often than not occur farther away from any populated areas.

The Chilean market currently generates around US$432 million in premium in quake cover.  To recover from such a disaster would take around 21 years.

Three years on and the Chilean economy is slowly starting to recuperate; rates for quake cover are gradually beginning to drop off after increasing 50-150% after the quake and the Chilean Central Bank forecast 2013 GDP growth of around 5% which will hopefully allow the Chilean insurance market to grow 6.5% in 2013.

Nearly 100% of insured losses have now been settled and communities have been rebuilt. 

In addition to the positive response of insurers after the disaster, the local insurance market has been subject to many improvements' for example, changes in underwriting policy.  Alfredo Schmidt, Manager for Property and Casualty at Willis Chile said, "Before the quake, insurers would generally only send engineers to evaluate risks whose insured amounts were considered significant.  After suffering heavy losses as a result of such catastrophes, it became clear that insurers did not know the extent of many of their exposures.  Now all risks are inspected by engineers before being accepted by underwriters."

Natural disasters cost the insurance market billions of pounds every year.  You can find out more about some of the roles responsible for helping people and business get back on their feet again by clicking here.

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