The New AIR Earthquake

Models For South America

Chile | Colombia | Ecuador | Peru | Venezuela

Earthquakes of M4.0 and greater in the South America region. (Source: AIR)

Seismicity

Located along the so-called Ring of Fire,

the western coast of South America is
one of the most seismically active regions
of the world. The largest earthquake
ever recorded took place herean M9.5
event that struck Valdivia, Chile, in 1960.
More recently, the 1998 M7.2 Bahia de
Caraquez-Canoa earthquake in Ecuador,
the 2004 M8.2 Pizarro earthquake in
Colombia, the 2007 M8.0 Pisco earthquake
in Peru, the 2010 M8.8 Maule and the
2014 M8.2 Iquique earthquakes in Chile
have all caused extensive damage. The AIR
models provide the most up-to-date view
of seismicity based on the latest historical
catalogs and active fault databases from
several global, regional, and local sources.

Maximum inundation height (in meters) caused by the 2010 Maule tsunami event. (Source: AIR)

TSUNAMI

The 2010 M8.8 Maule, Chile, earthquake

was a reminder of the risk of tsunamis
to those living along the Pacific coast of
South America. The tsunami spawned
by this earthquake ravaged the coastline
and destroyed more than 75% of the
town of Dichato. The AIR models feature
fully probabilistic tsunami modeling that
has been validated against all available
historical events, with a particular focus on
the well-recorded tsunami produced by the
Maule quake.

LiquEfaction

When an area saturated with groundwater

experiences strong ground shaking, the
soil can lose its ability to support structures
in a phenomenon called liquefaction. As a
result, buildings can suddenly tilt or even
topple, and buried utility lines can break.
Recent temblors around the world have
shown that damage due to liquefaction
can increase total losses significantly. The
AIR models explicitly capture liquefaction
risk in the major cities of Chile, Colombia,
Ecuador, Peru, and Venezuela.

Quito, Ecuador: panoramic view of the historic center (Source: Claude Meisch, Wikimedia)

EXPOSURE

The greatest concentrations of exposure

are the densely populated cities of Bogot,
Cali, Lima, Caracas, Medelln, Quito, and
Santiago. The AIR models incorporate
highly detailed industry exposure databases
(IED) at 1-km grid resolution containing
information on risk counts, replacement
values, occupancies, and construction types
of insurable structures. Industrial facilities
are among the highest value risks in South
America and account for a significant
portion of the insured value in these
countries. The AIR models have separate
damage functions for these facilities and
their individual components.

The 2010 Maule, Chile, quake caused major building damage in Concepcin. (Source: Claudio Nez, Wikimedia)

VULNERABILITY

The AIR models estimate losses to

residential, commercial, and industrial
assets, and to automobiles. These
calculations have been tailored to each
countrys unique building practices and
have been peer-reviewed by local experts
at leading South American institutions.
The models also incorporate findings from
damage surveys, studies of local building
codes, detailed claims data analysis, and
structural engineering research.

1500

1700

1750

1800

185

M8.7

M8.5

1730 Valparaiso

1822 Valparaiso

CHILE

COLOMBIA
M8.3

1797 Riobamba

ECUADOR
M8.5

1687 Lima Callao

PERU
M8.0

M7.7

1812 Caracas

1530 Cumana

VENEZUELA

SIGNIFICANT HISTORICAL EARTH

1900

50

2000

1950

M8.5

M8.8

M8.7

1868 Arica

M8.0

1922 Vallenar

1985 Santiago

M7.6

1958 Frontera con Ecuador

M7.5

M7.7

M5.6 M7.4

1983 Popoyan

1992 Murindo

1979 Narino (Cauca)

M8.6

M7.9

1906 Esmeraldas

M6.9

1929 Cumana

2001 Armenia

M7.2

2004 Pizarro

1998 Bahia

M7.9
1940 Lima Callao

M6.2

M7.2

1942 Guayaquil

M8.2

M8.2

2014 Iquique

M7.7

1875 Cucuta

1868 Ibarra

2010 Maule

M8.1

1970 Chimbote

1966 Callao

M8.4

2001 Arequipa

M8.1

M8.0

1974 Lima

M6.6

1967 Caracas

HQUAKES IN SOUTH AMERICA

2007 Pisco

M7.0

1997 Cariaco

SUPPORT FOR COMPLIANCE WITH CAPITAL

REQUIREMENTS
South Americas insurance markets are experiencing
strong growth. To safeguard this progress,
regulators are looking to establish modelbased capital requirementsa vastly preferable
alternative to standard formulae that can mandate
reserves that are either too large or insufficient
to reflect the actual risk. In Peru, for example,
the Superintendencia de Banca y Seguros (SBS)
requires domestic insurers to assess their risk by
using catastrophe models. In Chile and Colombia,

regulators are revising the countrys set of

requirements in the spirit of Europes Solvency II. As
these new regulatory regimes take hold, regulators
and capital markets can gain confidence that
companies are well-positioned to survive the next
major earthquake.
The AIR models can be used to manage risk and
satisfy regulatory requirements that base capital
reserves on probabilistic loss estimates.

Whats Your Risk?

Where are your concentrations of exposures
relative to areas of high hazard? Based on detailed
modeling of your portfolio, how likely are different
levels of loss?
To help you answer these questions and truly
own your risk, AIR is releasing new earthquake
models for South America in the summer of 2015.
The models will provide insurers and industry
stakeholders with the most advanced and current

view of shake, liquefaction, and tsunami risk in

Chile, Colombia, Ecuador, Peru, and Venezuela.
Combined with AIRs Touchstone catastrophe risk
management platform, the new AIR Earthquake
Models for South America are the most advanced
tools the insurance market will use for assessing
earthquake risk in the region.

About AIR Worldwide

AIR Worldwide (AIR) is the scientific leader and most respected provider
of risk modeling software and consulting services. AIR founded the
catastrophe modeling industry in 1987 and today models the risk from
natural catastrophes and terrorism in more than 90 countries. More than
400 insurance, reinsurance, financial, corporate, and government clients rely
on AIR software and services for catastrophe risk management, insurancelinked securities, detailed site-specific wind and seismic engineering analyses,
and agricultural risk management. AIR, a Verisk Analytics (Nasdaq:VRSK)
business, is headquartered in Boston with additional offices in North
America, Europe, and Asia. Visit us at www.air-worldwide.com.

2014 AIR Worldwide