The 8.8 magnitude earthquake that struck Chile on February 27 - one of the five strongest quakes recorded in the past century - could be one of the costliest ever if the insured losses come in at the high end of early estimations.

Catastrophe modeller AIR Worldwide estimated the insured losses from the quake would be greater than $2 billion, while Eqecat, another cat modeler, estimated insured losses could be $3 billion to $8 billion, which would represent about 15 percent to 40 percent of the estimated insured limits for earthquake coverage.

The Chilean insurance association AACH has estimated insured losses of at least $2.5 billion to $2.6 billion, based on a 8 magnitude quake in 1985 that destroyed 140,000 homes, where insurers paid 7.2 percent of the damage.

The costliest earthquake ever for insurers was a 6.7 magnitude quake that struck Northridge, California, in 1994, causing an estimated $20 billion in insured losses and killing 60 people, according to a November. 23, 2009 Best's Special Report on earthquakes.

Direct premiums in Chile in 2008 totalled $5.8 billion, including $2.3 billion for property/casualty insurance and $3.5 billion in life insurance, according to Swiss Re. As rescue workers continue to pull people from destroyed buildings - the number of people killed had risen to more than 800 by March 5 - insurers are still working to assess and calculate the damages from the quake.

The quake and its potential insurance ramifications were a common topic at recent earnings calls for insurers.

"It's obviously early days," Charles Philipps, CEO of Amlin plc., said during the company's conference call. While he said Amlin's aggregates "are quite contained, and we don't expect it to set us off course", he said earthquake losses can take a long time to mature because of potential structural damage to buildings that may not be recognised right away.

Chile's largest general insurer, Royal & SunAlliance Seguros Chile, a subsidiary of London-based RSA Insurance Group, estimates losses of about £30 million ($45.1 million) net of reinsurance.

In a conference, call, Liberty Mutual chief financial officer Dennis Langwell said the company has "very significant" reinsurance for its business in Chile, but estimates exposures to be about $80 million. Liberty Compania de Seguros Generales, a subsidiary of Liberty Mutual, is the sixth-largest property/casualty writer in Chile, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database.

Bermuda-based Lancashire Holdings Ltd. said the company has exposure to Chile in onshore energy, property retrocession, property direct and facultative and property catastrophe, but said "it is premature to estimate the extent of any potential losses." The Chile quake, which struck the central part of the country, may have destroyed 80 percent to 90 percent of the buildings of some towns near the epicenter, AIR Worldwide said.

Chile's capital of Santiago, about 200 miles from the epicenter, has fared much better. Thousands of modern mid-rise and high-rise buildings in the capital withstood the earthquake without structural damage, thanks to the country's strict building code. However, in several instances mid-rise apartment buildings are still standing, but have enough structural damage that they will have to be torn down, AIR said.