Second in a Series of Posts on the Haitian Earthquake Tragedy and Insurance

The magnitude-7 earthquake that struck just outside Haiti’s capital, killing many, and causing untold  property damage will cost hundreds of millions to repair. But most private insurers will pay little in claims, because the private insurance market is almost non-existent in developing countries such as Haiti.

“Insured losses will be minimal, despite the severity of the event,” said Robert P. Hartwig, president of the Insurance Information Institute, in a Wednesday interview. “The reason is that Haiti is one of the poorest countries in the world, with very little private insurance.”

In a more developed part of the world, such as California, a big earthquake would result in “billions” in insured losses, Hartwig said. “Insured losses in Haiti will probably be measured in millions, and not that many.” That is a tragedy for the Haitian society in and of itself.

“For this type of event, no one insurer has any kind of large exposure,” said Tom Larson, senior vice president of Eqecat Inc., a catastrophe insurance risk modeler. “One insurer might have lost everything they have insured in Haiti in this one event, but we don’t expect it to be a major event to any one of them.”

Eqecat estimated that the cost to rebuild Haiti will run into the hundreds of millions, but that much of that will come from international aid rather than private insurance payments.

So far, German reinsurer Hannover  has said it estimates a EUR20 million loss from the earthquake, though the company did not immediately say the nature of its loss.

A spokesman for Chubb Corp. said the company is not aware of any insured exposure in Haiti.

American International Group Inc., one of the largest commercial insurers, has not issued a public statement on the scope of the potential insured losses there.

Haiti will likely receive some help from its main catastrophe insurer, the Caribbean Catastrophe Risk Insurance Facility, a regional fund administered by participating governments. A spokesman said that Haiti’s earthquake coverage is up to $8 million, which would be paid from the fund in about 14 days, once the earthquake is categorized. The spokesman said he knows of little private insurance coverage in Haiti.

U.S. companies pledged more than $43 million in aid within the first 72 hours after the quake struck Haiti. U.S. aid, including individual donors,  is predicted to sharply increase in the aftermath of the tragedy.

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