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CHENGDU, ChinaInsurers may face losses as high as $1 billion from the earthquake that has killed at least 12,000 in a mountainous region in China’s eastern Sichuan Province, AIR Worldwide is estimating.
Rescue efforts are continuing in the days after the 7.9 magnitude earthquake on May 12 struck the heavily populated region. The death toll is expected to rise as workers comb the rubble for survivors.
Catastrophe modeling firm AIR said total damages are likely to exceed $20 billion. The insured portion is expected to be higher than $300 million and could reach $1 billion, the Boston-based modeler said in a statement.
AIR cautioned that there is a high level of uncertainty in estimating insured losses in China, where the insurance market is rapidly developing and earthquake coverage is optional for residential and most commercial risks.
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The value of property in Chengdu, Sichuan Province’s capital city of 4.5 million people, exceeds $115 billion, with only a small portion covered by insurance, AIR said.
The earthquake occurred along the Longmeng Shan fault in the north-south seismic belt of central China, according to Bingming Shen-Tu, China project manager for AIR. The belt is the most seismically active region in China, he said in the statement. “It also presents the highest risk in China because of the proximity of large concentrations of population. Indeed, Sichuan is China’s most heavily-populated province.”
Mr. Shen-Tu said Chengdu’s older residential buildings made of unreinforced masonry or wood with adobe or brick walls will have fared poorly in the quake. But it appears that well-engineered high-rise office buildings there have survived relatively unscathed, he said.
“If there is any good news to be gleaned from this event, it is that the earthquake struck at some distance from densely populated Chengdu,” said Mr. Shen-Tu.
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