Best’s News & Research Service - September 21, 2017 07:59 AM (EDT)
A.M. Best Comments on Impact to Insurance Industry Following Central Mexico Earthquake
- September 21, 2017 07:59 AM (EDT)
Mexico City //BestWire// - While A.M. Best expects Mexico insurers to experience elevated claims activity following a magnitude 7.1 earthquake that struck near Mexico City on Sept. 19, 2017, conservative retention levels by primary insurers and well-placed reinsurance coverage should help mitigate industry losses.
A new Best’s Briefing, “Widespread Damage Reported From Earthquake Centered Near Mexico City,” states that many of the buildings most severely damaged in Mexico City appear to have been of older construction. Since the deadly 1985 earthquake, which struck exactly 32 years ago to the day of the most-recent earthquake, buildings have been designed to comply with more stringent construction standards. Nearly all the leading Mexico insurance companies are based in Mexico City and for many of these firms business interruption may be more of a factor than actual property damage, as there are widespread power outages and many roads are impassable.
A.M. Best will monitor the development of claims, particularly as some insurers may experience losses in conjunction with the earthquake that took place earlier in the month. As of December 2016, Mexico’s insurance industry reported earthquake catastrophic reserves of USD 999 million (MXN 20 billion), representing approximately 10% of the industry’s adjusted surplus, incorporating earthquake catastrophic reserves. The Mexico government also has in place a catastrophe bond for up to USD 360 million against losses from earthquakes and tropical cyclones, issued in August 2017, which would be payable to Mexico’s fund for natural disasters, FONDEN. Though this bond was triggered by the Sept. 7 earthquake, such resources would likely not be triggered by this earthquake due to the lower magnitude.
To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=265888 .
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