The Christchurch earthquake is a major disaster that could deliver a bill of up to $4.3 billion, according to risk analysts.

The state of emergency in the South Island’s largest city has already been extended once, and after-shocks are still expected to occur, albeit at a slowing rate, over the next few weeks.

Damage to property and infrastructure has been significant but the “combination of a remote occurrence location and relatively robust building design” are expected to prevent widespread devastation, modeller Eqecat said last week.

“At this time, earthquake-induced damage is expected to total from $US1 billion ($1.08 billion) to $US4 billion ($4.3 billion),” Eqecat said. “The breakdown of damage is expected to be about half dwelling and half commercial occupancies. This event is a major disaster occurrence for the region.”

Risk Management Solutions (RMS) expects 60-70% of the insured loss will be residential, and 30-40% commercial and industrial.

The majority of residential claims will be paid out by the Earthquake Commission (EQC), though some claims will be large enough to exceed the $NZ100,000 ($79,000) limit.

The residential claims total expected by EQC is at the upper end of $NZ1-2 billion ($780,000- $1.57 billion) which would trigger its reinsurance program.

Christchurch’s building evaluation team has now assessed 970 buildings within the central business district. Only 5% of the buildings assessed are considered unsafe, with 25% requiring further structural assessment. The remaining 70% are regarded as safe.

According to AIR Worldwide, a more complete picture of the damage is now emerging. While design requirements for new construction in New Zealand are quite stringent, Christchurch has many historical masonry buildings, which dominate the central business district.

Aftershocks are a concern to AIR. At least three have been of magnitude 5 or greater.

AIR says the quake is thought to have occurred on the Porters Pass-Amberley fault zone, which forms the southern part of the collision zone along the Pacific-Australia plate boundary, but scientists at NZ’s Institute of Geological and Nuclear Sciences are now speculating it originated in a previously unknown fault.

Small businesses affected by the quake are expected to face difficulties, with few holding business interruption cover, prompting emergency payments from the NZ Government for businesses with fewer than 20 staff.

Social Development Minister Paula Bennett says the Government doesn’t yet know how many will need to take this up, “but we’ve set aside $NZ15 million [$11.75 million] at this stage”.

Insurance Brokers Association of New Zealand CEO Gary Young told insuranceNEWS.com smaller companies are less likely to have taken out business interruption cover than their larger counterparts.

“Anecdotally, small businesses are less likely to have taken out the cover than the larger corporate customers,” he said.

“There is always the perception that it would not be difficult to get back up and running quickly. The reality, of course, is that it is hard enough when only one business is affected by an event.

“But where damage is widespread on the scale we have in Christchurch, recovery will be long and difficult for many businesses.”

Insurance Council of New Zealand CEO Chris Ryan told insuranceNEWS.com.au banks, insurance companies and the Government are working together to help businesses at this “very unusual time”.

Moody’s analyst Marina Ip says the banks’ exposure in Christchurch is on average around 10% of their NZ loan portfolios.

“The immediate impact will be a rise in delinquency rates due to disruptions to business and as some individual borrowers face unemployment or are forced to take unpaid leave,” she said.

She says although the Christchurch quake is a major event, the impact on the bottom lines of Australian-owned insurance companies in NZ is “very limited”. The amount of claims handled by leading insurers IAG and Suncorp is “easily manageable”.