Willis Re: Shake-up your EQ protections

Richard Keegan, Head of Retro, Bermuda, Willis Re

Earthquakes in Colombia and Venezuela happen at one of the Earth’s most complicated seismic junctions, where slowly moving tectonic plates collide. Recent events there may seem linked but their proximity in time and space is probably a coincidence. Both were within the expectations of seismologists and reinsurers.

Two things are different, though. One is our understanding of earthquakes. We are now better able to characterise where damaging earthquakes are expected to occur and what the potential loss range a specific earthquake may cause. For example, the recent 2026 M7.4 Colombia earthquake (the strongest since the 1906 M8.8 Ecuador-Colombia earthquake) caused $9.6 billion ground-up losses and occurred within a well-recognised source zone that was explicitly represented in the state-of-the-art hazard models. Another is the soft market, which offers an abundance of earthquake capacity.

In combination, these factors help reinsurance and retro buyers. The competition to deploy excess capacity has left some reinsurers willing to consider a variety of new and reintroduced coverage structures. Meanwhile, an ever-improving understanding of earthquakes improves clarity about what to buy and for where. Together these circumstances can help reinsurers manage their earthquake accumulations more effectively.

Now’s the time to re-evaluate your earthquake protections.

Willis Re is well placed to advise on this as it partners with the Willis Research Network to leverage the latest scientific research and innovations in catastrophe modelling.

Researchers studying the tectonics of South America have identified the subduction of the Nazca Plate beneath the South American Plate as the primary mechanism driving megathrust earthquakes in the region. Continuous monitoring of plate deformation, combined with detailed measurements of slip distributions from past earthquakes, provides valuable insights into areas with the greatest potential to generate large seismic ruptures. These are critical insights for designing and implementing effective earthquake protection and risk management strategies.

A major earthquake doublet (M7.2 and M7.5) occurred in Venezuela just 47 days before the Colombia event. The Venezuelan earthquakes were significantly shallower than the Colombia earthquake and are estimated to have generated approximately $37 billion in direct physical damage to buildings and infrastructure alone. Similar to the Colombia event, the causative fault system, the San Sebastián Fault, was well characterised prior to the earthquake.

These events caused serious damage and loss of life but are unlikely to trigger retro payouts. Excess-of-loss treaties typically attach at levels which would be catastrophic in North America or Japan but are not triggered by equally ferocious events in places where insured values are lower. As a result, such regions where the necessary earthquake protection is lacking suffer substantial economic and societal impacts. This disparity highlights the significant protection gap and underscores the need for innovative risk transfer solutions. Developing products tailored to local market conditions could help improve financial resilience and reduce the economic burden of potential future events.

Willis Re’s market-leading retrocession team helps risk carriers assess and optimise their retrocession programmes through deep market expertise and tailored risk transfer strategies. We work closely with clients to improve programme efficiency and develop innovative solutions for managing accumulation exposures, including parametric and index-based products. Our advice is strengthened by the Willis Research Network, whose leading seismologists provide cutting-edge insights through collaboration with global scientific institutions. Together, we help clients capitalise on market opportunities and strengthen their outward reinsurance protection across earthquake and all other major perils.