NEPAL – As rescuers scramble against time to rescue those who are still trapped inside collapsed buildings in Nepal, economists said the massive earthquake that hit the country last Saturday could cost USD2 billion in economic losses.
The death toll in the earthquake has already passed 3,500 as of Tuesday and thousands more are still missing, Nepalese authorities said.
More than the human loss due to the earthquake, the country will have to brace for the economic losses brought about by the massive tremor.
Kinetics Analysis Corp said the country stands to lose about USD2 billion from the earthquake and only a fraction of the cost will be paid by insurers.
That is because insurance penetration in Nepal is too low. The earthquake, therefore, will expose the fact that insurance penetration in most developing countries is woefully low.
A report released by the Insurance Information Institute showed that spending on property-casualty coverage, such as auto and home insurance, in Nepal is less than USD4 per capita annually.
In the US, the spending is almost USD2,300. In 2013, insurers in Nepal collected about USD277m in premiums, mostly from live coverage.
In the neighboring nation of India, the earthquake’s damage cost about USD800m but only less than 1 percent of the losses is covered by insurance.
“Most developing countries just don’t really have mature insurance industries,” Chuck Watson, Kinetic Analysis’s director of research and development, told Bloomberg in a telephone interview Monday. “It’s getting by day-to-day. They’re not really concerned with things like insurance.” – BusinessNewsAsia.com