Insurance impacts from the 7.4-magnitude earthquake that struck Taiwan last Wednesday are still being assessed, with residential losses to be largely borne by a government-backed scheme. 

CoreLogic estimates insurable losses could reach $US5-$US8 billion ($8-$12 billion), including residential, commercial, industrial and agricultural properties and losses ceded to the Taiwan Residential Earthquake Insurance Fund.

The fund, established after the devastating 1999 Chi-Chi earthquake, retains most of the household property risk ceded and transfers the remainder to domestic and international insurers. 

Analytics firm GlobalData says while insurers are expected to weather the financial impacts well, they may re-evaluate risk exposures and adjust premiums to maintain profitability. 

“Being located in one of the three major seismic regions globally, Taiwan is prone to natural calamities, especially earthquakes,” GlobalData Insurance Analyst Aarti Sharma said. 

“As a result, the penetration of earthquake insurance is moderately high in Taiwan, and the current earthquake is expected to result in high claims for local insurers and reinsurers.” 

Mr Sharma says the increased frequency of large-scale natural catastrophes is expected to drive demand for fire and natural hazard policies in Taiwan, which will support property insurance growth over the next five years. 

AM Best Senior Director, Head of Analytics Christie Lee says previous major earthquakes in Taiwan have typically led to industrial loss claims. 

“This is due to the technology and science sectors being material to Taiwan’s overall economy and the large insureds purchasing adequate insurance protection, with these exposures ultimately being ceded to the international reinsurance market,” she said. “More generally, a significant amount of losses could come from business interruption coverage.” 

The earthquake damaged buildings in Hualien City, on the east coast, and caused landslides. As of Saturday, the death toll was 13. 

Hualien City, with a population of more than 300,000, is relatively far from the three major science parks in western Taiwan. 

The US Geological Survey says the earthquake was the strongest in the area for 25 years.