Insurance losses are expected to be minimal after a 7.4-magnitude earthquake and its aftershocks hit Guerro, Mexico yesterday, causing buildings as far away as Mexico City to sway, according to catastrophe modeling firm AIR Worldwide.
“I’d be surprised if insured losses surpassed $100 million dollars because the earthquake occurred in a remote area without significant population,” said Robert Hartwig, president and economist with the Insurance Information Institute in New York. “This is the first major quake of the year [in Mexico]. It did not occur offshore so there’s no risk of a tsunami. There was no material impact on industry in Mexico or on American insurers or reinsurers operating in Mexico. It’s all about location, location, location. If it had happened in Mexico City, it would be different."
In the epicentral region, 500 houses were damaged where lack of coverage is largely among homeowners, not businesses.
“Like Americans, Mexicans don’t like to buy insurance. Most homeowners don’t have insurance but it’s a moot point because they had little if any damage,” says Hartwig. “Foreign manufacturing firms are insured for earthquakes uniformly in Mexico.”
Mexico is more susceptible to earthquakes than most countries, with tremors occurring daily. According to AIR, due to the repetitive and destructive nature of earthquakes in Mexico, building codes in this country are among the most comprehensive in the world. However, there are no national codes. Instead, each of the more than 2,400 municipalities in Mexico enacts and enforces its own regulations, and thus, the seismic performance of buildings in Mexico is greatly influenced by local construction practices.
