Chilean insurer ratings not expected to be impacted by quake: Fitch

The ratings of Chilean insurers are unlikely to be affected by the earthquake and tsunami that hit the area this week, according to rating agency Fitch.

The firm believes the industry “will likely be able to absorb” the resulting claim losses, which most strongly impacted Chile's north and central-north zones.

Even though Chilean reinsurance coverage is sound and of limited counterparty risk, the quake, which took place on Wednesday (September 16) adds to a series of natural disasters that have affected the country this year, including floods in the north and volcanic eruptions in the south.

These events have pressured the forecasted insurer profitability for the end of 2015 and reinstallation capabilities of catastrophe reinsurance coverage, considering the increased frequency of disasters during the reinsurance coverage period.

Based on estimates from the US Geological Survey, economic losses may be anywhere from $100 million up to $1 billion.

Fitch predicts actual results may come in at the high end of the range, however, insured losses are likely to be a fraction of the total losses at $500 million or less, with losses to insurers netting out much lower because of the industry's strong catastrophic reinsurance protection.

The rating agency said: “Fitch expects the bulk of claim losses from yesterday's events would be assumed by recognised international reinsurers with sound creditworthiness; Fitch is confident in the reinsurers' ability and willingness to meet their claims obligations in a timely manner.

“Fitch is also confident in the availability of reinsurers to supply cash advances to facilitate claims payments and thus avoid industry liquidity pressures (caused by potential mismatches between claims payment and cash collection from reinsurers) or pressure on the industry's capital adequacy.”