The first earthquake stress test in Turkiye has estimated that the financial impact of a potential Marmara earthquake would reach $21bn at the current exchange rate, borne by the insurance sector alone, excluding the Turkish Catastrophe Insurance Pool (TCIP).
The modelling, commissioned by the Insurance and Private Pension Regulation and Supervision Authority (SEDDK), was carried out by T-Rupt Technology, a subsidiary of the government-owned Turk Reansurans, reported the newspaper Hurriyet.
The projected damages would be around four times the $5bn that insurers paid for the 6 February 2023 magnitude 7.8 Kahramanmaras earthquakes. Of the $5bn, the TCIP paid out around $1.1bn.
The study analysed four earthquake scenarios ranging from magnitude 7.1 to 7.4 in the Marmara Sea region, examining potential damage to industrial facilities, commercial businesses and residential properties across 10 provinces. Insurance companies currently provide total coverage of TRY11.5tn ($274bn) in the 10 provinces. These provinces have high industrial density and residential concentration, and are close to potential epicentres.
According to the Hurriyet report, the modelling exercise indicates that, in the event of an earthquake with a magnitude of 7.1 to 7.4, the amount of insured damage would range between TRY380bn and TRY500bn. These figures are based on end-of-2024 values. Calculated using the exchange rate at that time, the insured damage would be slightly over $14bn. With a simple calculation using today’s exchange rate, the insured damage from a potential Marmara earthquake could reach $21bn. (The Turkish lira has been losing its value gradually against the US dollar each month this year to date, in a downward trend that has prevailed for more than a decade.)
The insurance sector made payouts of 5% of the total $105bn economic loss in the Kahramanmaras earthquakes. The low insurance payout was because of low insurance coverage in the Kahramanmaras region, which was not an industrial-intensive area.
In contrast, Marmara has both dense industry and high insurance rates in industry and residences. The region hosts Turkiye's largest industrial base and most populous city, Istanbul.
The modelling was conducted by T-Rupt Technology, Turkiye's only modelling company owned by Turk Reasurans, which is wholly owned by the Ministry of Treasury and Finance. The stress test was commissioned by the SEDDK to determine the scale of potential damage and identify which regions would be most affected, allowing insurers to prepare adequate reserves and reinsurance arrangements.