Insurance losses from the February 27 Chilean earthquake, which has killed nearly 1000 people and devastated the southern city of Concepcion, is poised to become the second most costly earthquake-related disaster.

Estimates of the repair bill from the 8.8 magnitude event are between $US2 billion ($2.2 billion) to $US8 billion ($8.8 billion). This would place it second behind the 1994 Los Angeles quake, which incurred insured losses of $US22.2 billion ($24.5 billion).

Risk management consultant Eqecat estimates insured losses between $US3 billion ($3.34 billion) and $US8 billion ($8.8 billion), while rival company AIR Worldwide places the figure “above $US2 billion” ($2.2 billion).

More than 65% of the damage is to residential properties, with the remainder split evenly between commercial and industrial, Eqecat says.

Two factors inhibiting the final cost of insurance payouts are Chile’s strict building codes and the prevalence of non-insurance, particularly in residential properties.

Chile lies at the crossroads of two tectonic plates, and therefore experiences an earthquake of 7.0 magnitude or more every seven years.

“Chile’s building codes are among the most stringent in the world,” Insurance Information Institute President Robert Hartwig said from New York.

“Had Chile not heeded the lessons of another devastating earthquake in 1960 and invested in earthquake-resistant building designs, the country’s situation would resemble that of Haiti.”

While total general insurance premiums in Chile are measured by Swiss Re at $US5.8 billion ($6.4 billion) in 2008 – far ahead of Haiti’s $US19 million ($21 million) – only 60% of commercial and 10% of residential properties are covered, AIR Worldwide says.

About 10% of insured properties have no provision for earthquake damage.

Axco Insurance Information Services says the bulk of insurance costs will be picked up by reinsurers due to high levels of ceding by Chilean insurers.