Chile shakes again: A legal perspective on main effects for insurers

Two natural catastrophe events have shaken Chile recently.  This is the take away, from our legal perspective:

On March 27th, thunderstorms brought the equivalent of 7 years of rain to Chile’s Atacama desert region and caused deadly flooding and mudslides. Antofagasta, where the annual average precipitation is 0.13 inches, saw 0.9 inches of rain in just 12 hours.

“The Atacama Desert is an extremely arid region and has been for centuries. As a result, the terrain is hard and rocky because rainfall isn’t frequent or abundant enough for either weathering rocks into sand or supporting the kind of ecosystem that would help turn rocks and minerals into soil. Without soil and plant cover to help absorb rainfall, it just runs off instantly as torrents of water,” Weather.com senior meteorologist Nick Wiltgen said.

This natural disaster has affected small mining towns in the desert but also important cities such as Copiapo.  Highways, power plants and access roads were affected–and in particular,  the mining industry.

Main effects for insurers:

  •  Property damage mainly to roads, electric grid, power plants, and pipelines.
  •  Business Interruption of the mining sector.  Energy supply to the mining industry (as well as cities´) was interrupted.  Mining industry replaced their usual energy source with less efficient fuels.
  •  Distributors to take a hit. Deadlines on deliveries breached.
  •  Coverage issues as to definition and application of flooding, mudslide, and debris removal clauses; and applicable deductibles.

On April 22nd, the explosive and unexpected eruption of Calbuco in Chile’s touristic and economically active southern X Region spread the volcanic ash column across an 800 km wide area, well past the nearby city of Puerto Montt and the 20 km exclusion area.  If the estimated USD100m insurers paid in claims related to the 2008 eruption of the nearby Chaite volcano is anything to go by, insurers can expect similar losses concerning nearby salmon fisheries, utilities, hotels, and other tourism operations.

Alex Guillamont, Kennedys Latin America Director

Alex Guillamont, Kennedys Latin America Director

Alex Guillamont is the director of Kennedys Latin America and leads the Latin American and Caribbean practice at Kennedys. He handles disputes on behalf of leading international insurers and reinsurers, having represented clients across the region. With 15 years of experience, Alex is an acknowledged leading expert on insurance and reinsurance matters regionally. After serving the market with claims in Iberia from our London and Madrid offices, he relocated permanently to Miami in June 2010. The industry has voted him year on year into the LATAMIR Power 50 list, Latin American insurance sector most influential professionals. His team in Miami has been awarded the 2013 and 2014 Reactions Latin America Awards for best Law Firm.

Kennedys’ Latin America and Caribbean office is based in Miami to help international insurers and reinsurers manage claims and non-contentious issues across the region. Our dedicated multilingual team is well placed to support our clients, and we also draw on the skills and experience of Kennedys globally.

The Miami team works with our network of Latin American and Caribbean law firms. Kennedys have associated offices in Brazil, Chile, Colombia, Chile and Mexico and long-standing relationships with leading insurance and reinsurance law firms in the rest of the region.

Our lawyers in Miami are also supported by our international insurance team, including the London Market division and other offices around the world who handle some of the most significant insurance and reinsurance matters worldwide.

After being recognized as the market’s choice in 2013, Kennedys Latin America has once again been voted by industry leaders as Best Latin America (re) insurance law firm for 2014 by Reactions Magazine.

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