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The recent events in Chile have had devastating effects for local population and industries and insurers/reinsurers behind them. However, both the regulator SVS and the association of Chilean insurers AACH have approached the situation with a swift and commonsense approach. The public has been made aware that insurers will take into account the specific circumstances of each insured before applying the strict time periods that would otherwise apply to notify incidents, per the particular wording agreed in each case. The regulator has provided a helpline and reminded insureds that earthquake cover may be found by way of endorsement to policies protecting against fire risks.

Also by endorsement to fire policies, it may be possible that some insureds will claim cover for events resulting from the quakes such as material damage (and any ensuing BI) which may be alleged as caused by riots, looting, civil commotion, or malicious damage. In those areas where the military have imposed a curfew or other measures to restore order, the requisitioning of property by the authorities will not normally be insured. However, material damage caused by the authorities whilst attempting to minimise public disorder may be covered by endorsement to the fire policy.

Since there continue to be earthquake replicas in the area, it may be sometime before final loss figures are to hand. Estimates of overall insured losses of between USD 2- 6 billion are considered at the moment. It is estimated that insurers will bear 25% of the overall economic losses suffered by the country, of which slightly over 75% will be assumed by international insurers and reinsurers. Feller Rate (S&P Chile) considers that the local market has capacity to meet about USD500m worth of claims before resorting to external financing.

In conjunction with our Santiago associate office, we are seeing a sensible approach from large insureds and reinsurers alike who are interested to take advice on the extent of their respective exposures and policy response before proceeding further.

Earthquake: Chilean market making a concerted effort

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15 March 2010	Visit Kennedys online »