Insurance costs for earthquakes, tsunamis could fall in Chile

The application of Chile's newly developed seismic risk map could reportedly translate into a more accurate calculation of reserves by insurers and, accordingly, into a drop in premium prices for insurance against earthquakes and tsunamis.

The seismic risk map – developed by experts from Chile, Japan, Norway and the US and commissioned by the local insurers' association AACH – when applied to the calculation of maximum-probable-loss (MPL) could result in a reduction in necessary reserves.

When calculating the MPLs based on the map for tsunami risk, these could drop in the order of two digits at a national level, with the consequent reduction in reserves needed and in prices, Marcelo Mosso, executive in charge of projects at AACH, was reported as saying by local newspaper Estrategia.

Chilean insurers will inform local regulator SVS about this information so that the industry can comply with the new standard. The process could take about two years, Mosso said.

The tsunami risk is the first report to be presented based on the risk map model and was prepared using two scenarios: 2010's earthquake and another, more extreme quake involving 11 cities (Arica, Iquique, Mejillones, Antofagasta, La Serena, Coquimbo, Quintero, Viña del Mar, Valparaíso, San Antonio and Talcahuano).

Pictured is a seismic map developed by AIR