How hard is IAG going to run?, page-73

I just bought a sizeable amount of IAG as I always do around these levels....my reasoning is of an interpretation of media reports and early estimates of losses which suggests economic losses as a result of the earthquake that struck Victoria and caused damage in Melbourne are likely to be US$100m – with insured losses for the whole market likely to be less than the total economic loss.
So from a bit of reading the biggest risk is if there are aftershocks that are large risks of aftershocks are elevated straight after an initial earthquake.
GeoScience Australia on its website reported an earthquake of 5.9 magnitude moment magnitude or Mw at 9:16am on Wednesday in the Alpine National Park south-east of Mansfield and north of Rawson in Victoria, at a depth of 10km.
This is approximately 100km from Melbourne CBD. Normally earthquakes near high population-density zones are among the scenarios along with cyclone risks that insurers model for events that threaten being a probable maximum loss in deciding how much catastrophe reinsurance to buy to protect themselves.

The main classes of insurance affected by earthquakes are home building and fire and industrial special risk (ISR, property), although there could be some additional losses in classes like motor, and liability from negligent construction.
Ground shaking from earthquakes is the main cause of damage to man made structures, and this is primarily determined by:

1) the earthquake's magnitude (higher is exponentially worse – every increase of 1.0 in the moment magnitude increases the energy release by circa 32x);
2) depth of the earthquake (deeper is less destructive) and the site's proximity to the fault (exponential decay);
3) the local geology and the soil type (sandy is worse than rock as it can lead to liquefaction as in Christchurch and Mexico city).
I didn't going any other areas or historical measures around the world because I didn't want to read through over 5,400 pages of gobble gook
The extent of damage caused from the shaking is usually determined by:
1) construction standards (Australia standards are not that strong as it is seen as seismically less active, but compliance is likely to be high);
2) construction material (brick worse than wood);
3) insured values (Australia would have high exposure here with high take-up of insurance and no exclusions).

Media reports are suggesting there are some damaged buildings in Melbourne, but we have not seen reports of any deaths.
Pictures of damage appear to be somewhat limited although there are some concerning images of a few buildings in parts of Melbourne where there is clear structural damage.

The US Geological Survey (USGS) estimates economic loss likely to be in the US$1–10m range (37% probability), with a 23% chance of being between US$10–100m and a 6% chance of being between US$100m–1bn.
Insured losses are likely to be lower than these numbers as not all losses are likely insured.
Geoscience Australia which is good read although you have to be at time a scientist which I am not shows limited shaking in populated areas around Melbourne.

So after saying all of that, I think the considerable distance from major population centres like Melbourne and soil type limiting shake intensity have likely limited the extent of insured damage.
I don’t think the event will threaten the retentions of IAG, SUN or QBE, although now I have just bought into IAG with a sizeable unit holding the risk of repeated tremors remains the biggest risk, judging by past earthquakes, including in New Zealand.
If losses do become elevated, we will likely see reinsurance costs rise, but also premium rate rises.

There is money to be made in a disaster as vulturistic if there is such a word as I may sound.