Chile Wildfires 2024 – First official data and analysis

Massive fires ravaged over 18,000 hectares of Chile’s countryside from the end of January to the beginning of February. Chile’s Valparaiso region suffered the most damage with 8,600 hectares of forests, companies, universities, and homes consumed along with hundreds of deaths.

Most recently, the fires’ focal point has shifted to Chile’s center-south, threatening the agricultural and forestry industries.

Given the fires’ structural and human damages, the Chilean (re)insurance market has experienced a rapid increase in claims being filed.  On 26 February 2024, the Financial Markets Commission, which includes the insurance regulator, released the first comprehensive set of data:

• 1,055 non-life losses had been reported as of February 20.
• Of those, 64% related to property policies and 30% to auto.  The majority of claims (72%) were filed in Viña del Mar.
• Whilst it is still early days, the exposure (sum insured) in the municipalities worst hit of Viña del Mar, Quilpé, Villa Alemana, and Limache would be around USD120m.

It is expected for the regulator to supervise actively prompt processing and payment of respective claims, as has been the case in previous similar natural catastrophes. The Commission is present in affected areas and informing individuals impacted of their rights as insureds. 

Local markets have also been instructed by the regulator to reinforce customer support channels and guarantee speedy claims processing and corresponding payments. Additionally, the commission is requiring local insurers produce detailed information regarding their exposure in affected areas; total cost of all related claims to date; and the impact of such claims on the insurer’s, and subsidiaries, operations.

Despite the fires’ reduced impact as opposed to initial projections, the (re)insurance market faces several challenges and must consider certain details when affronting the fire’s consequences. The market might apply exclusions to some claims in light of Chilean authorities’ announcement of their investigations into arson potentially causing the fires. Also, the market will have to identify the totality of assets affected and policies triggered and determine the scope of each covered event in conformity with 72-hours clauses applicable.

As with any large geographical area, the markets will likely have to deal with issues related to whether business interruption has been triggered, where there may not be physical damage to insured assets.  Force majeure and related exclusions will feature in liability claims.  Not all fires are created equal—cause and origin investigations will be needed in some instances.  Claims regarding vehicles damaged whilst at repair shops will also have to be considered.  

Reinsurers will also have to adapt to Chile’s claims adjustment regulatory framework. Namely, to the officially neutral nature of adjusters and to statutory time constraints for claims handling and payment. Additionally, the market’s response will have to comply with the local legal definitions of relevant events, such as arson and terrorism.