Estimators weigh cost of a disaster

INITIAL estimates suggested yesterday's Los Angeles earthquake could have caused dollars 5bn ( pounds 3.35bn) of damage, writes Paul Durman.

Lloyd's of London, the insurance market, drew a parallel with the San Fernando earthquake of 1971, which cost dollars 1.7bn, or about dollars 5bn at today's prices. Lloyd's said both quakes had roughly the same epicentre and measured 6.6 on the Richter scale.

However, many of the homeowners and businesses whose property was destroyed yesterday may be unable to claim. The threat of earthquakes makes insurance punitively expensive and many people are uninsured. The cost to the insurance industry is therefore expected to be substantially less than the total cost. Members of Lloyd's will not pick up any of the bill unless the insured cost rises beyond dollars 3.5bn.

Balcombe Group, usually among the first to estimate the costs of natural disasters, held back from quantifying the 'extensive' damage.

The world's costliest natural disaster was Hurricane Andrew in 1992, which caused dollars 20bn of damage.