During this day, the Ministry of Finance confirmed the hiring of the earthquake insurance together with the World Bank —through the International Bank for Reconstruction and Development—, whose objective is to cover the financial impact of this type of high-intensity event.
The cost of the insurance contracted with the world Bank has a coverage of $630 millionwhich will allow Chile to receive pre-established compensation payments for up to the maximum, in the event of certain seismic events that are categorized as High intensity and those that cause a Material damage to the country and Public finances.
The Minister of Finance, Mario Marcel, pointed out that “this constitutes a new step towards public finances that are better protected and resilient in the face of large-scale natural disasters, such as an earthquake, and is part of a comprehensive strategy that reinforces our commitment with fiscal responsibility.
Likewise, the Secretary of State thanked the WB for its support in the transaction: “the mobilization of capital for catastrophic risk management is a key element in supporting our comprehensive strategy, which also contemplates the availability of resources in the National Budget for events of greater frequency but lower fiscal cost”.
Marcel also pointed out that this initiative helps in the creation of the Fund for Natural Disasters (Foden)which is currently under discussion in the Senate, which seeks to cover the events of less periodicitybut with a greater impact on public finances.
Carlos Felipe JaramilloVice President of the World Bank for Latin America and the Caribbean, pointed out that “thanks to the intermediation of the World Bank, with this catastrophic bond, Chile will be able to transfer significant seismic risks to the capital markets, while allowing the authorities to deal with quickly to the needs of citizens when a catastrophe occurs.
Earthquake Insurance Benefits
The insurance has a financial impact for the country, since it serves to cover different events that may occur in the national territory.
- It covers the financial impact of high intensity events such as earthquakes.
- Helps generate fiscal policy management and the level of public debt in Chile.
- It will allow Chile to receive pre-established compensation payments of up to $630 million.
