The Commission for the Financial Market (CMF) published today a minute that addresses the impact that a new advance on annuities would generate – a measure contained in the project for the fourth retirement of pension savings – on life insurance companies (CSV). In this regard, the entity indicated that the initiative “would put the solvencies of the CSVs at risk.
“This initiative would put at risk the solvency of the life insurance companies (CSV) and, therefore, the payment of the pensions of all retirees with life annuities in these entities,” the CMF said in the document.
“The potential tax effects are substantial, both due to the eventual activation of state guarantees for life annuities, as well as the actions that the Chilean treasury would face in national courts and international instances,” he added.
The foregoing, they pointed out from the agency, because the initiative would “severely” affect the assets of the CSVs.
“In the event that the legal maximum possible is withdrawn, the CSVs would experience a loss ranging from 30% to 60% of their assets,” they warned.
“In this context, a minimum of 3, and a maximum of 9 CSV (total 15) would fall below the regulatory capital minimum. Additionally, in the maximum advance scenario, 7 companies would face liquidity problems in a one-year horizon” they added.
“The lower solvency of life insurance companies not only affects the 698,857 pensioners for life annuities that Chile has today. It would also put at risk the payment of life insurance to more than 2.5 million people, complementary health insurance to 7 million people and the Disability and Survival Insurance (SIS) to the entire workforce listed in the AFPs in Chile, “they warned.
The CMF concluded that annuity advances “should be treated independently of the 4th withdrawal.”
- You can read the full minute here.
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