Chile, Bolivia and Ecuador: What insurers should know

In recent weeks the LATAM region has experienced crises which will impact insurance coverage in the region:

Chile

Protests in Chile began over a proposed price hike in subway tickets in the capital city of Santiago but have since developed into larger demonstrations, which have seen areas vandalised, including shops and businesses.

Since the 19th October a number of cities have been under curfew (8pm to 6 am) and declared in a state of emergency. 

As a result Sebastian Pinera, Chile’s president, met with all relevant political parties. This resulted in the proposal of a number of political, economic and social measures that are currently being debated in Congress.

Bolivia

During the recent general election in Bolivia, after approximately 95 per cent of the votes were counted, election officials announced that current Bolivian President Evo Morales received 46.8 percent of the votes, while his closest rival, Carlos Mesa, got 36.7 per cent. However, preliminary results released hours after the polls closed showed a tighter margin between the two leading candidates, which could have led to a runoff in December.

On 21st October an updated tally of votes appeared to give the incumbent a big enough lead to avoid this. But some have accused President Evo Morales of election fraud, leading to violent protests and acts of vandalism.

Ecuador

Ecuador’s President Lenin Moreno recently announced an end to 40-year-old subsidies for fuel, which he said were ‘no longer affordable’. The decision meant that diesel and petrol prices would more than double.

The measure was received with a national strike which has led to the episodes of looting, vandalism and violence, causing the government to declare a state of emergency.

The government has recently reached an agreement with the protesters, promising a number of measures, including the restructure of debts.

Recommendations

In light of the above, and considering that property damage, business interruption and/or political violence insurance coverage may be triggered as a result of the described incidents, it is important for the market to consider: (i) the social/political context of each country and its differences; (ii) the legal situation of each social crisis, its circumstances and features; (iii) the concept of Martial Law, Coup, Curfew, among others, and the authorities’ decision on the matter; (iv) the legal criteria that has been applied to each crisis; and, (v) the impact of all the above could have in the Insurance market/policies, especially considering the extent of concepts/exclusions such as riots, looting, civil commotion, popular disorder, etc.