Chile continues to assess the damage of an 8.3 magnitude earthquake that killed more than 10 people on Sept. 17 and led to the evacuation of over 1 million people around the coast, according to media reports. But Fitch Ratings believes that the country’s insurance companies will be able to absorb the resulting claim losses.
Fitch said it does not expect its ratings of Chilean insurance companies to be affected by the earthquake or the tsunami that followed (the north and central-north parts of the country were the most affected).
Preliminary economic loss estimates from the U.S. Geological Survey range from $100 million to $1 billion, and Fitch said it believes actual results could land in the high end of that range. But insured losses will be a small part of the total losses ($500 million or less), Fitch said, “because of the industry’s strong catastrophic reinsurance protection.”
Fitch added it expected the bulk of claim losses from the Chile quake/tsunami to be recognized by international reinsurers with sound creditworthiness.
Chile’s insurance industry is highly regulated compared to regional peers, and foreign insurers own a large part of gross written premiums in the P/C segment, Fitch said. Among the major carriers involved in the market: Mapfre, RSA, Zurich, Liberty Mutual, Santander, Cardif, Chubb and ACE.
Still, Chilean insurers and reinsurers have had to deal with plenty of other catastrophe events this year.
Fitch noted that “the recent quake adds to a series of natural disasters that have affected the country” in 2015, including floods in northern Chile and volcano eruptions in the south. The ratings entity said that the combined events put some pressure on insurer profitability for 2015, as well as reinstallation capabilities of catastrophe reinsurance coverage (due to higher disaster frequency during the reinsurance coverage period).
Insurers should be able to handle things, however, according to Fitch.
“Fitch is confident in the reinsurers’ ability and willingness to meet their claims obligations in a timely manner,” it said. Fitch added it expects reinsurers will be able to supply cash advances to facilitate claims payments, helping to avoid insurance industry liquidity or capital adequacy pressures as a result.
Source: Fitch Ratings