My try::
The huge earthquake that occurred in Chile in 1960, had a magnitude of 9.5,
believed to be the largest earthquake the world has ever seen.
(A) believed to be -- (Misplaced Modifier) here -ed modifier is trying to modify The huge earthquake, which is placed quite far from it.
(B) and that is believed to be -- (Construction error : Clause and that (restrictive clause) such parallelism is not allowed either it should be clause and clause or restrictive and restrictive type)
(C) and it is believed to have been -- POE -- Other options are wrong. Idiomatic : The huge earthquake is believed to
have been(BE) the largest earthquake
(D) which was, it is believed, -- (Misplaced modifier) which is trying to modify far away noun The huge earthquake, further placement of "it is believed" is wrong.
(E) which is believed to be -- (Misplaced modifier) which is trying to modify far away noun The huge earthquake.