Catastrophe modeling firm AIR Worldwide released its initial estimates of industry insured losses from the earthquake that struck New Zealand’s South Island early this week, putting a range of $762 million to $3.5 billion out for the event (NZD1.15 billion to and NZD 5.3 billion in local currency).

More than 80,000 landslides and 2,600 aftershocks have been recorded following the moment magnitude 7.8 earthquake that struck near Hanmer Springs on Nov. 14, according to Dr. Bingming Shen-tu, assistant vice president at AIR Worldwide.

“The temblor was the largest experienced by the country since the 2009 M7.8 Dusky Sound earthquake and one of the four most powerful since 1855,” Shen-tu reported, adding that recovery efforts have been hampered by gale-force winds, heavy rains and flooded roads.

AIR’s modeled insured loss estimates include:

• Insured physical damage to property (residential, commercial/ industrial), both structures and their contents from ground shaking.
• Demand surge—the increase in costs of materials, services, and labor due to increased demand following a catastrophic event—although not triggered by this event.
• Direct business interruption losses.

AIR’s modeled insured loss estimates do not include:

• Losses to uninsured properties.
• Losses to land.
• Losses to automobiles.
• Losses to infrastructure.
• Indirect business interruption losses.
• Loss adjustment expenses.

The epicenter of the M7.8 earthquake was near the small tourist town of Kaikoura, which lies half way between Christchurch and the capital, Wellington.

According to AIR, much of the region impacted by the Nov. 14, 2016 event is rural and sparsely populated, but significant damage accounting for at least half of the losses from this event is reported in Wellington on the southern tip of North Island.

Most residential damage will be covered by the government-owned insurer, the Earthquake Commission (EQC), which is backed by $3.3 billion (NZD 4.7 billion) in reinsurance, the AIR report said.

Separately, A.M. Best issued a briefing about the Nov. 14 and continuing aftershocks stating that insured losses from a series of earthquakes “are likely to be material for some domestic insurance companies.”

“A.M. Best believes that claims from the earthquakes are likely to undermine the underwriting performance of some large insurers, especially those with high-risk accumulation in the upper South Island and the lower North Island,” the briefing said, while noting that it remains too early to gauge the impact on the financial condition of the New Zealand insurance sector as a whole.

Citing figures from the Insurance Council of New Zealand, Best reported that total gross written premium of the general insurance industry was roughly NZD 5.3 billion in 2015—the upper end of AIR Worldwide’s range of estimated losses.

According the rating agency, IAG and Vero Insurance are the major general insurers in the affected regions, such as Kaikoura and Wellington.

At this point, A.M. Best does not expect to take rating actions on any rated companies in the near

term. In the wake of the Canterbury Earthquakes in 2010-11, most general insurers in New Zealand have moved to “sum insured” policies for home insurance, rather than “full replacement”

cost coverage, and they have raised deductibles for commercial insurance, the briefing noted.

Sources: AIR Worldwide, A.M. Best