Volcanoes in Iceland have prominently featured in world news reports in recent years, but it is earthquakes that are the most dangerous natural catastrophe peril for the country.

Now a team at Aon Benfield has launched a catastrophe model to assist insurers and reinsurers in estimating the financial impact of earthquakes in Iceland.

For those who have clear recollections of the 2010 eruption of Eyjafjallajökull, which sent a huge ash cloud into the atmosphere causing 20 countries to close their airspace to commercial jet traffic, it might come as a surprise to learn that earthquakes represent a bigger danger than volcanoes in Iceland.

There have been four eruptions since 2000, including two since the 2010 event.

However, during the past 20 years earthquakes have accounted for 83 per cent of catastrophic losses in the country, which is the most earthquake-prone region in northwest Europe.

Earthquakes of magnitude 6.5 and 6.3, which struck in 2000 and 2008 respectively, caused total insured damage of about 146 million euro ($160 million).

Aon, in collaboration with Iceland Catastrophe Insurance, has developed the catastrophe model which has damage curves “based on detailed high quality loss observation data from the past two major events in Iceland”.

Seismic source zones are based on a catalogue from the Icelandic Meteorological Office of recorded earthquakes back to 1926 and historical earthquakes back to 1700.

The model can be accessed by any insurance or reinsurance company.