Earthquake, Türkiye, Insurance, 2023: Analyzing the Catastrophic Impact on Syria and the Turkish Lira

The 2023 Kahramanmaraş earthquake sequence has etched itself into history as one of the most devastating natural disasters to hit Türkiye and Syria. Occurring in February 2023, this seismic event caused extensive damage across multiple regions, particularly concentrating in the south-central part of Türkiye and northwestern Syria. The final estimate of losses, as released by Perils, a renowned catastrophe insurance data provider, stands at a staggering 116.9 billion Turkish lira. This loss is not only significant in its monetary value but also in its broader implications for the affected regions’ economies, infrastructure, and the insurance industry.

Perils’ final estimate of 116.9 billion Turkish lira, equivalent to approximately $6.2 billion, marks the largest loss estimate for a single catastrophe event in the company’s history. This figure surpasses previous records, such as the 2019 Typhoon Hagibis in Japan, underscoring the unparalleled scale of destruction wrought by the earthquake. The majority of these losses were incurred in the commercial sector, although residential properties also suffered considerable damage. The insurance industry, already reeling from the pandemic’s economic impacts, has taken a significant hit, with this event likely leading to an increase in insurance premiums for the affected region.

The February 2023 earthquake’s impact was not confined to Türkiye alone; neighboring Syria also bore the brunt of the disaster. The quake caused extensive damage to buildings and infrastructure, disrupting the lives of millions. In Türkiye, the government-run Turkish Catastrophe Insurance Pool (TCIP) covers residential building losses, while commercial losses fall under the purview of private insurers. This dual system has proven somewhat effective, yet the sheer scale of the disaster has exposed gaps in coverage and highlighted the need for more robust risk assessment and management strategies in earthquake-prone regions.

The total economic cost of the earthquake is estimated to be around $105 billion, considering the exchange rate of February 2023. This figure encompasses both insured and uninsured losses, reflecting the widespread impact of the natural disaster. The government has faced criticism for its slow response in delivering new homes for the displaced three million people. This delay has compounded the suffering of those affected, many of whom are still grappling with the loss of their homes and livelihoods. The earthquake has thus underscored the urgent need for efficient disaster response mechanisms and comprehensive insurance coverage.

The insurance industry’s response to the catastrophe has been multifaceted. Residential building losses are primarily covered by TCIP, while commercial losses are handled by private insurers. Reinsurance renewals saw substantial changes in the wake of the disaster but were successfully concluded. A new mechanism has been implemented to adjust the coverage provided by TCIP in line with inflation, ensuring that policyholders receive adequate compensation. Despite these measures, the high insured losses from the earthquake sequence have placed immense pressure on the insurance sector, necessitating a reevaluation of existing policies and risk management strategies.

Perils’ final report on the earthquakes provides valuable insights into the disaster’s impact. The estimate of $6.2 billion in insured losses is based on a combination of ground-up damage surveys and modeled industry loss data. This detailed analysis, carried out by a team of experts at Perils, highlights the importance of accurate data in understanding and mitigating the effects of such catastrophic events. The report serves as a crucial resource for the insurance industry, aiding in future risk management and policy formulation.

The discrepancy between Perils’ initial and final estimates can be attributed to the complexity of the event and the ongoing aftershocks. The initial estimate, released in April 2023, was lower than the final figure, reflecting the challenges in assessing the full extent of the damage immediately after the disaster. As more data became available and the situation evolved, the estimate was revised to provide a more accurate picture of the losses incurred. This iterative process underscores the dynamic nature of disaster assessment and the need for continuous monitoring and analysis.

The earthquake has had a profound impact on the region’s economy, with many individuals and businesses suffering significant losses. The total insured losses of $6.2 billion highlight the critical role of insurance in providing financial protection against natural disasters. However, the event also exposes the limitations of existing insurance systems, particularly in terms of coverage adequacy and the speed of claims processing. The high uninsured losses further emphasize the need for comprehensive disaster management strategies that encompass both preventive measures and post-disaster recovery efforts.

The Turkish lira, already under pressure due to various economic challenges, has been further destabilized by the earthquake. The massive financial outflows required for reconstruction and compensation have strained the country’s fiscal resources, contributing to currency depreciation. This economic instability has had ripple effects, impacting inflation rates and overall economic growth. The earthquake thus serves as a stark reminder of the interconnectedness of natural disasters and economic stability, highlighting the need for resilient economic policies that can withstand such shocks.

The Kahramanmaraş earthquake sequence has also brought attention to the broader issue of earthquake preparedness in Türkiye and Syria. Both countries are situated in seismically active regions, making them vulnerable to future earthquakes. The disaster has prompted calls for improved building codes, stricter enforcement of construction standards, and enhanced public awareness campaigns. These measures are essential to mitigate the impact of future seismic events and ensure the safety and resilience of communities in earthquake-prone areas.

In conclusion, the 2023 Kahramanmaraş earthquake sequence has left an indelible mark on Türkiye and Syria, causing unprecedented losses and exposing vulnerabilities in existing disaster management systems. The final loss estimate of 116.9 billion Turkish lira ($6.2 billion) underscores the scale of the disaster and the critical role of insurance in mitigating its financial impact. However, the event also highlights the need for more robust risk assessment, comprehensive insurance coverage, and efficient disaster response mechanisms. As the affected regions begin the long road to recovery, the lessons learned from this catastrophe will be invaluable in shaping future policies and strategies to enhance resilience and preparedness.

The role of organizations like Perils in providing accurate data and analysis cannot be overstated. Their final report on the earthquake offers crucial insights that will inform future risk management decisions and help build a more resilient insurance industry. As Türkiye and Syria rebuild, the focus must be on creating sustainable and resilient communities that can withstand the challenges posed by natural disasters. This requires a collaborative effort involving governments, insurers, and communities to develop and implement effective disaster preparedness and response strategies.