Property losses resulting from the earthquake that shook China this week could total between $10 billion and $20 billion, according to the early analysis of two of the world's leading catastrophe modelling firms — but only a fraction of that cost will be borne by the insurance industry.

Risk Management Solutions (RMS) and AIR Worldwide say the 7.9 magnitude earthquake, the epicentre of which was around 60 miles away from the city Chengdu, will likely incur the highest insured losses in Chinese history.

Chengdu is China's 10th largest city by gross domestic product (GDP) — where more than 30 Fortune 500 companies and 12,000 domestic organisations are situated, according to RMS.

AIR believes that total insured losses are likely to exceed $300 million and could reach $1 billion.

In a statement released yesterday, RMS said: "Insurance penetration varies significantly by line of business, ranging from negligible for residential property, more than 50 percent for high-end commercial buildings in Chengdu and full coverage for the industrial facilities owned by multinational companies."

Domenico del Re, senior model manager at RMS, said: "Business continuity will be a fundamental issue, as the areas affected are burgeoning manufacturing zones for hi-tech companies. Some companies have already reported disruptions to their operations and this could have serious ramifications, not just for these organisations but for those downstream of the supply chain.

"Events like these highlight the need for companies to manage their risk of contingent business interruption." RMS estimated total likely property losses of between $10 billion and $15 billion, according to their preliminary estimates. AIR's estimate was $20 billion.

AIR said there was a high level of uncertainty in insured loss estimates in China, because the insurance market is rapidly developing and earthquake coverage is optional for both residential and commercial policies.

"Insurance take-up rates in this region (the percentage of buildings actually insured against the earthquake peril) are minimal for residential properties and only marginally higher for commercial properties," AIR said.