Taiwan’s strongest earthquake in 25 years could drive meaningful loss for local insurance industry

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A 7.2 magnitude earthquake struck 18km south of Taiwan’s Hualien city at 8am local time today, driving the strongest tremors to have hit the country in the last 25 years, and given the region’s relatively high levels of insurance penetration it could be a meaningful loss for the local insurance industry.

taiwan-quake-2024Global media outlets have shown footage of collapsed residential buildings, with numerous other residential buildings either titled or on the verge of collapsing. Due to the earthquake’s impact vehicles have been smashed and items inside stores are in disarray, along with power cuts and internet outages reported across the island.

Taiwan’s government said on early afternoon Wednesday local time that 711 people had been injured in the earthquake and that 77 people were trapped, with seven reported dead.

As well as causing multiple buildings to collapse in Hualien, the shocks have been felt as far as Taiwan’s mountainous interior, which was rocked by huge landslides. Wu Chien Fu, Director of Taipei’s Seismology Centre, commented, “The earthquake is close to land and it’s shallow. It’s felt all over Taiwan and offshore islands…It’s the strongest in 25 years.”

This is reportedly the strongest quake to hit the country since September 1999, when a 7.6-magnitude earthquake hit Taiwan, killing 2,400 people and damaging or destroying 50,000 buildings, causing insured losses of $800 million.

Taiwan is located in the Circum-Pacific seismic zone, one of the world’s three major seismic regions. The country has relatively high levels of quake insurance penetration, so this earthquake could cause a meaningful loss for the local insurance industry, with the potential for some reinsurance support to be required.

Following the 1999 quake, the government established the Taiwan Residential Earthquake Insurance Fund (TREIF), a non-profit organization which operates as an earthquake insurance pool system designed to build consensus to strengthen the earthquake insurance mechanism.

The TREIF initially started with a capacity of NT$50 billion and four liability tiers, including co-insurance pool, TREIF, domestic and overseas reinsurance markets and capital markets, and the government.

The mechanism has been altered over the years, with the most recent update taking place in March 2024, when the authority revised “Enforcement Rules for the Risk Spreading Mechanism of Residential Earthquake Insurance” raising the risk assumption limit of the residential earthquake insurance’s risk spreading mechanism to NT$120 billion effective from April 1st, 2024, in response to the growth of cumulative liability amounts in recent years and forecasted future growth trends.

It’s understood that policies provide coverage for actual total loss or constructive total loss due to consequences caused by the aftermath of an earthquake. Once the insured residence is assessed to meet the requirements of a total loss, the underwriting insurer will pay the insured amount and contingent living expense to the policyholder.

The post Taiwan’s strongest earthquake in 25 years could drive meaningful loss for local insurance industry appeared first on ReinsuranceNe.ws.

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