According to unofficial figures, the social unrest experienced in Chile since October 2019 could well give rise to losses in the local insurance market totalling some USD3 billion, though notably arising from just 5,000 claims. This loss profile contrasts sharply with the 2010 Chilean earthquake, which generated some 220,000 claims with a value of around USD 6.8 billion. The riots have given rise to far fewer claims, but of much greater value and complexity.
According to information from the Santiago Chamber of Commerce (CCS), around 25,000 businesses have been affected by ongoing social unrest. Of this total almost 10,000 are small and medium sized enterprises, many of which don’t have insurance for such events. The standard basic policy currently in the Chilean market covers fire, and only exceptionally will extend cover to terrorism, or for loss caused by strikes, public disorder and looting. Whether coverage exists, therefore, will depend upon each policy.
While today all local companies are analysing the definitions and coverage in their policies and assessing the coverage impact of social unrest, an additional question remains: When and how is the deductible to be applied? This question involves determining the concept and extent of the "event" or harmful “occurrence”, as the case may be. Specifically, what are the limits of an event giving rise to multiple losses, and accordingly how many deductibles are engaged?
The key question to consider when analysing the number of events or occurrences and therefore how many limits or deductibles apply is whether the circumstances meet the test of having sufficient “unities” such as causation, time and place as well as obviously the precise language of the policy. This is a matter of both factual evidence and legal interpretation and there will be complex questions to consider when looking at the factual background to the social unrest and whether there are in fact sufficient “unities” to allow aggregation around a single cause or event or whether the outbreak of unrest and its consequences in different places and at different times means there are multiple occurrences or events triggering multiple limits and/or deductibles.
This may have very significant consequences for both the Insured and Insurers/reinsurers and is likely to be a controversial topic for some time.
