The Insurance and Reinsurance Law Review: Chile
Chilean insurance and reinsurance companies can be stock corporations as long as they provide these services only and comply with the special regulations established in the Chilean Corporations Act (companies subject to special regulations).2
The sale of insurance in Chile can be made by a general insurance company (first group) or a life insurance company (second group). The former covers the risk of loss or damage of goods or patrimony. Life insurance companies, on the other hand, cover risks of persons or guarantee, within or upon termination of a certain term, capital, a paid-off policy or income of the insured party or its beneficiaries. Exceptionally, personal risk and health can be covered by both types of companies. Risks related to credit can only be insured by general insurance companies having the sole purpose of covering this type of risk, which could also cover surety and fidelity.
Anyone is free to take out insurance in Chile. Taking out insurance abroad is not forbidden, but insured parties are subject to the legislation governing international charges and taxation. Insurance and reinsurance companies are allowed to underwrite risks arising abroad. Contracting insurance policies with foreign companies not established in Chile are subject to the same taxes applied to the insurance policies signed locally, notwithstanding other applicable taxes.
As regards reinsurance, this can be contracted with the following entities:
- national corporations whose exclusive scope of business is reinsurance;
- national insurance companies, which can only reinsure risks from the group for which they are authorised to operate; and
- foreign reinsurance entities, which are classified by risk-classification agencies approved by the regulator, the Commission for the Financial Market (CMF), and ranked at least within the BBB risk category or its equivalent.3
Reinsurance can be provided by the foreign reinsurance entities at (c) above either directly or through reinsurance brokers registered in the Registry of Reinsurance Foreign Brokers Registry, which is managed by the CMF.
In this respect, foreign reinsurance entities must designate an attorney-in-fact with broad powers to act on their behalf in Chile, including the power to serve and be served with court proceedings. However, it is not necessary to designate an attorney-in-fact if the reinsurance is made through a reinsurance broker registered with the CMF who is deemed to represent the foreign reinsurance underwriters of the reinsurance contract for all legal purposes.
i The insurance regulator
In Chile, the CMF supervises the solvency and operations of insurance and reinsurance companies, brokers and loss adjusters and has the power to request balance sheets, financial statements and portfolio information. In addition, the CMF issues general rules relating to intermediation, underwriting, adjustment and policy contracts, which are compulsory for all the companies under its supervision.
The CMF was created in March 2017 to replace the former Securities and Insurance Superintendency (SVS).4 Generally speaking, the CMF is vested with broader authority to supervise the financial market and enforce its regulations.5 The CMF works through a Council comprised of five members known as commissioners. The President of the Council is vested with authority in several areas, including executing and enforcing the regulations and agreements of the Council. In addition, the President represents the CMF. The law that created the CMF also separated the function of investigating potential breaches of the law and regulations from that of imposing sanctions. In this sense, all investigations are now led by a prosecutor, while the potential sanctions are determined and decided by the Council.
While the law establishing the CMF implied certain organic changes, there have been no substantive changes with regard to the regime that governs insurance and reinsurance (including regulations for brokers and loss adjusters). However, the CMF has more powers than the former SVS in connection with different operational aspects of the companies under its supervision, including powers to request financial information in connection with the process of mergers, acquisitions, divisions, transformation or liquidation of companies; it can coordinate and cooperate with other government entities, such as the Chilean Internal Revenue Service (IRS) and the Public Prosecutor's Office; and it has the power to examine specific operations of companies and request relevant information.
The CMF's main objectives are to continue contributing, including adequate control measures, to maintaining and increasing markets' confidence and providing more efficient tools for their development. The CMF is contemplating important changes with respect to its predecessor. First, it is ruled by a five-member Council, whereas before there was a single supervision system. The CMF has more research tools to prevent and detect specific regulatory breaches. In addition, the investigative and sanctioning processes are separated, which is an important step towards guaranteeing due process in connection with individuals and companies subject to the supervision of the CMF.
ii Position of non-admitted insurers
Foreign insurers that are incorporated abroad may offer and sell direct insurance cover in Chile in relation to international maritime transport, international commercial aviation, merchandise in international transit and satellites, and the cargo they transport.6
In addition, in June 2007, the Insurance Companies Act (Decree No. 251 (DFL 251)) was amended to allow companies incorporated abroad to establish branch offices in Chile. These branch offices are subject to the general procedure provided by the Corporations Act for the incorporation of agencies of foreign companies, and must obtain authorisation from the CMF.7 In addition, the branch offices must prove to the CMF that they comply with all requirements established for the authorisation of insurance companies, and they must follow further publication and registration formalities.
iii Requirements for authorisation
There are no requirements or restrictions regarding the financing of the acquisition of an insurance or reinsurance company. In addition, there are no specific requirements or restrictions concerning investment in an insurance or reinsurance company by foreign citizens or companies or foreign governments, except for general provisions relating to foreign investment.
The minimum capital required to be held by a Chilean insurance company is 90,000 Chilean indexation units (UF). In the case of Chilean reinsurance companies, this is 120,000UF.
To meet the obligations of underwriting insurance and reinsurance business, Chilean-regulated insurers and reinsurers must establish technical reserves in accordance with the current principles, procedures, mortality charts, interest rates and other technical parameters within the time limit and in the format established by the CMF through general rules.
iv Position of brokers
Brokers are regulated under the Regulations Applicable to Insurance Industry Officers (Supreme Decree 1055-2013),8 which regulate the activities of both insurance brokers and adjusters.
v Regulation of individuals employed by insurers
In general, directors of insurance and reinsurance companies must be at least 18 years old and comply with the general requirements that operate in Chile for stock corporations, namely:
- not being a member of a board of directors that was revoked owing to rejection of the company's balance sheet by shareholders;
- not being accused of or charged with the criminal offences indicated in the Corporations Act;
- not being a governmental officer or executive for a state-owned company that exercises supervision or control functions; and
- not holding a public position, which applies to members of Congress, government ministers or undersecretaries, chiefs of public services, CMF employees and stockbrokers.
Notwithstanding the above, there are further requirements for directors and officers of companies in the life insurance sector.
vi The distribution of products
Insurance products must be sold mainly in accordance with the CMF regulations and the Consumer Protection Act.
vii Compulsory insurance
Some areas of compulsory insurance cover in Chile are motor liability, employers' liability for occupational accidents and diseases, and brokers' errors and omissions. In addition, Decree Law 3,500 of 1980, which regulates the Chilean pension system, also establishes a compulsory insurance in connection, inter alia, with disability and social security life annuity to be contracted jointly by all the companies authorised to manage the pension funds covering.
Insurance and reinsurance law
i Sources of law
The legislative framework applicable to insurance and reinsurance consists in various regulations and laws:
- Title VIII of Book II of the Code of Commerce, entitled 'About Insurance Contracts' and, in particular, Article 512 et seq., regarding non-maritime insurance;
- Title VII of Book III of the Code of Commerce, entitled 'Maritime Insurance';
- DFL 251, which regulates insurance companies;
- Supreme Decree 1055-2013;
- resolutions issued by the CMF (and resolutions issued formerly by the SVS); and
- general provisions relating to the interpretation of contracts found in the Civil Code.9
The provisions on general and non-marine insurance contained in the Code of Commerce were enacted almost 140 years ago and for a long time were not revised, despite numerous industry developments. However, on 9 May 2013, a new law was enacted (Law 20,667 (the New Insurance Law)), which replaced all the former non-marine provisions (contained in Title VIII of Book II of the Code of Commerce) and finally updated Chilean insurance law to be in line with current trends and market practice. The New Insurance Law also changed certain provisions on marine insurance (contained in Title VII of Book III of the Code of Commerce) and introduced a couple of amendments to DFL 251. The New Insurance Law entered into force in December 2013.
ii Making the contract
Essential ingredients of an insurance contract
Under the New Insurance Law, an insurance contract is an agreement whereby one or more risks are transferred to an insurer, in exchange for a premium, who becomes obliged to indemnify the damage suffered by the insured or to satisfy capital, income or other agreed provisions.
The essential ingredients of an insurance contract are the insured risk, the insurance premium and the insurer's conditional obligation to indemnify. The absence of any of these ingredients renders the contract void.
In addition, the New Insurance Law defines reinsurance as an agreement whereby the reinsurer undertakes to indemnify the reinsured within the limits and modalities set out in the agreement, for liability affecting its patrimony as a consequence of the obligations it has undertaken in one or more insurance or reinsurance contracts. For construing the will of the parties, the New Insurance Law takes into account international reinsurance practice.
Utmost good faith, disclosure and representations
Chilean law recognises the concept of utmost good faith and the insured must honestly disclose the information requested by the insurer to allow the latter to identify the object of the insurance and assess the nature of the risk.10 For these purposes, it suffices that the insured reports exclusively according to the aforementioned insurer's request.11 However, if the insurer fails to request information at the placement stage, the insurer is then not allowed to allege any errors, reticence or inaccuracies by the insured, nor any facts or circumstances not included in the request for information.12
If the loss has not occurred and the insured has been culpably reticent or committed errors or inaccuracies that are decisive in the risk assessment according to the above rules, the insurer can rescind the insurance contract. However, if the errors, reticence or inaccuracies are not decisive, the insurer can request an amendment of its terms to adjust the premium or coverage to account for the unreported circumstances. If the insured rejects the insurer's amendment proposal or fails to answer within 10 days of the date on which it is sent, the insurer can rescind (avoid) the contract.13
If the loss has occurred, the insured may be exonerated from its liability to pay indemnity if the risk is one that could have allowed the rescission of the insurance contract in accordance with the above-mentioned rules. If not, the insurer can request that the indemnity is proportionally reduced to the difference between the agreed premium and the one that would have been applied if the true extent of the risk had been known.14
The above sanctions are not applicable if the insurer, before concluding the insurance contract, has known or should have known the errors, reticence or inaccuracies contained in the insured's statement of risk or, after its conclusion, agrees to remedy them or accepts them either expressly or tacitly.15
The insurance contract is null and void if the insured knowingly provides substantial false information when giving the risk statement to the insurer and the contract is avoided if the insured engages in conduct of this kind when claiming compensation. In these cases, once the annulment or avoidance (resolución) of the contract is declared, the insurer may retain the premiums or claim for payment along with the expenses needed as proof, even though the risk has not run. The foregoing is without prejudice to the criminal action that may apply.16
In addition, under Chilean insurance law, the insured is subject to the obligation of not aggravating the risk.17 The main principles related to aggravation of risk are contained in Article 526 of the Chilean Code of Commerce, which can be summarised as follows:
- The rules on aggravation of risk are only applicable to circumstances that substantially aggravate the risk.
- The insured must inform the insurer of circumstances that substantially aggravate the risk within five days of the time he or she becomes aware of them.
- It is assumed that the insured knows the aggravation of risk that comes from events that occurred with his or her direct involvement.
- If the loss has not occurred, the insurer has 30 days to inform the insured about either the rescission of the insurance contract or an amendment of its terms to adjust the premium or coverage to the true state of the risk.18 If the insured rejects the insurer's amendment proposal or fails to answer within 10 days of the date on which it is sent, the insurer can rescind the contract.
- If the loss has occurred and the insured has not informed the insurer about the circumstances that substantially aggravate the risk, in accordance with (b) above, the insurer is exonerated from its obligation to pay the indemnity.
- If the aggravation would have led the insurer to conclude the insurance contract with more onerous conditions for the insured, the insurer cannot rescind the insurance contract. However, in a case of this kind the insurer can request that the indemnity is reduced in proportion to the difference between the agreed premium and the one that would have applied if the true extent of the risk had been known.
- The above sanctions do not apply if because of the nature of the risk the insurer could have known and agreed on it, either expressly or tacitly.
- Except in the event of wilful aggravation of risk, if the insurance contract is terminated, the insurer must return to the insured the proportion of the premiums related to the period for which it is consequently discharged from liability.
Recording the contract
Pursuant to the New Insurance Law, the execution of an insurance contract is consensual, and its terms and existence can be proved by all legal means of proof, including but not limited to electronic documents, provided that there is prima facie written evidence arising from a document. In this respect, the insurance policy is defined as the document that justifies the insurance and, once issued, the insurer cannot challenge its terms.
iii Interpreting the contract
General rules of interpretation
As stated in Section III.i, insurance and reinsurance contracts are subject not only to the Code of Commerce, but also to the general provisions relating to the interpretation of contracts in the Civil Code19 plus certain provisions contained in DFL 251.
The Chilean position can be broadly summarised as follows:
- The provisions of the New Insurance Law are generally mandatory, unless stated to the contrary. However, if a clause is deemed to provide an insured with a greater benefit than is provided under the law generally, the specific terms of a policy will prevail over the Code of Commerce.
- Chilean law considers it of paramount importance to determine the intentions of the parties at the time of contracting and to give effect to those intentions even if they are not reflected in the literal words of the contract.
- A Chilean tribunal will strive to facilitate clauses in contracts with the goal of ensuring that the parties' intentions are fulfilled. Actions can include amending the contract if no provision is made for a given state of affairs.
- Under Chilean law, it is permissible for a tribunal to ascertain the parties' intention by looking outside the contract at, for example, the negotiations between the parties and market practice at the date of contracting.
- In construing the intention of the parties to a reinsurance contract, Chilean insurance law will consider international reinsurance practice.
According to Article 3(e) DFL 251, insurers must ensure that the contracted policies are drafted in a clear and understandable fashion. In the event of any doubt regarding the meaning of a provision when using model policies or clauses registered with the CMF (see below), the interpretation that is more favourable to the insured prevails.20
Incorporation of terms
Insurance and reinsurance companies must word their contracts using the model policies and clauses maintained in the CMF's Register of Policies. Exceptionally, they are able to use non-registered models when this relates to general insurance, where the insured or the beneficiary are legal entities and when the annual premium is higher than 200UF. In addition, non-registered models can also be used for cargo, transport, marine or aircraft hulls, or related insurance policies.
Reinsurers are subject to the principle of freedom of contract with a few mandatory restrictions, such as the fact that the reinsurer cannot alter the terms of the insurance contract and fund provision clauses are not enforceable. Direct actions of the insured against the reinsurer are not valid unless otherwise agreed in the reinsurance contract or subject to an assignment of rights from the reinsured to the insured after the loss.
Types of terms in insurance contracts
Under Chilean regulations, insurance policies must contain the following basic provisions and information:
- identity of the insurer, insured and beneficiary (if applicable);
- insured matter;
- insurable interests;
- risks taken by the insurer;
- policy period;
- insured amount;
- value of the insured matter;
- policy date and the insurer's signature; and
- the insured's signature when mandatory by law.
An insurance warranty is defined as 'the requirements aiming to confine or decrease the risk, which are stipulated in the insurance contract as conditions that must be met to allow payment of an indemnity after a loss'.21
In Chile, conditions precedent are not regulated. However, the insurer or reinsurer can achieve similar effects if they are treated as essential conditions of the contract, which are defined by the Civil Code as those without which the contract does not produce effects at all or degenerates into a different contract.
iv Intermediaries and the role of the broker
Chilean law regulates the activities of insurance and reinsurance brokers, sales agents of insurers and loss adjusters. Their main licensing requirements can be summarised as follows.
To act as a sales agent, the person or entity in question must first be registered in the special sales agent registry that will be kept by each insurer, which will contain certain minimum information required by Chilean regulations.
Insurance brokers are defined as natural persons or legal entities who have been registered as brokers with the CMF and who act as independent intermediaries in the contracting of insurance policies with any insurer.22
According to Chilean regulations, insurance brokers must provide information to all their clients on the diversification of their businesses and on the companies with which they work, in the manner determined by the CMF. In addition, insurance brokers are subject to a duty of providing information and must notify the CMF of any change of their address registered with the CMF, any amendment to the partnership agreement and any changes in managers, general representatives, directors or other administrators. They must also provide a summary of their operations in the manner and on the dates determined in a general rule issued by the CMF. Insurance brokers who become disqualified or whose circumstances are incompatible with their position or who do not provide proof that they have contracted an insurance policy in the time and form required for their job will be eliminated from the registry and may not work again as brokers. This notwithstanding, they will continue to be obligated and liable to the insured for the brokerage they have already made. Insurance brokers must be registered in the Insurance Trade Auxiliaries Registry maintained by the CMF and must comply with various requirements to conduct their activity, including establishing a guarantee, either through a bank bond or insurance policy, as determined by the CMF, which cannot be less than 500UF or 30 per cent of the net premiums of the insurance contracts brokered in the immediately preceding year (whichever is the higher), limited to 60,000UF to cover liability for correct and complete compliance with all obligations arising from their activity and particularly for damage that they might cause to the insureds who contract through them.23 In addition, legal entities must be legally incorporated in Chile. Managers, legal representatives or employees of the legal entity may not engage independently in insurance brokering or work for an insurance company or for another person engaged in insurance brokering.
Reinsurance brokers are subject to specific rules contained in SVS General Rule No. 139/2002. In general, they have to be registered in the special Registry of Reinsurance Brokers kept currently by the CMF (and formerly by the SVS) and must comply with the following requirements:24
- they cannot be registered as insurance brokers;
- they must establish a liability insurance policy for no less than 20,000UF or one-third of the premiums intermediated in the immediately preceding year, whichever is higher (the policy must not be subject to any deductibles); and
- foreign reinsurance brokers must be legal entities and must certify that they have been legally incorporated abroad and are entitled to intermediate risks ceded from abroad. In addition, foreign reinsurance brokers must designate an attorney with a broad range of faculties to act on their behalf in Chile, including the power to serve and be served with court proceedings.
Unlike in many jurisdictions, the loss adjuster is appointed to act as an impartial claims specialist who must be licensed and supervised by the CMF. The loss adjuster's role is to investigate and review the circumstances of the loss or damage and to report on the validity of the policy coverage in respect of the claim. The adjuster's report is released to both the insured and the insurer.
Agencies and contracting
As regards agency issues, intermediaries are subject to the general agency provisions of both the Civil Code and the Commercial Code.
When any event that may constitute a loss occurs, the insured must notify the loss to the insurer or insurers as soon as possible upon becoming aware of the event. The insured must also take all necessary measures for saving or recovering the subject insured or for keeping its remains.
Good faith and claims
Chilean criminal law forbids the fraudulent collection of insurance.
Set-off and funding
Under the New Insurance Law, there are specific provisions for bankruptcy. If the insurer goes bankrupt, the insured has the right to terminate the contract and request a proportional return of premiums. On the other hand, the insurer has the same option if the insured bankrupts before payment of the total premiums.
Dispute resolution clauses
Under the New Insurance Law, there is no need for dispute resolution clauses as insurance disputes are now subject to arbitration. Nevertheless, an insured has the right to make a claim in the local courts where the sum in dispute is less than 10,000UF. In this respect, the arbitrator has to be appointed when the dispute arises.
i Jurisdiction, choice of law and arbitration clauses
According to Article 29 DFL 251, any dispute arising from insurance and reinsurance contracts governed by the law shall come under the jurisdiction of the Chilean courts. This rule is mandatory and cannot be repealed by agreement of the parties. Therefore, although there is contractual freedom to agree on the applicable law, in principle any dispute must be settled in principle in the Chilean courts. Nevertheless, once a reinsurance dispute effectively arises, the parties to the reinsurance policy are entitled to resolve disputes under Chile's international arbitration rules.
Stages of litigation
Generally, in Chile, civil and commercial disputes at first instance comprise three main phases, namely discussion (exchange of pleadings), evidence and issuance of the judgment.
Unless remedies are waived, under Chilean law, the right of appeal arises when the decision of the inferior tribunal causes grievance to one or more parties (there are no specific causes). The appeal remedy is available for most first instance court rulings and is usually heard by a court of appeal. The appeal remedy must comply with basic form requirements. The regular term for appealing is five days but, in the case of final decisions, the period is 10 days counted from the service of the decision. Depending on the subject of the trial and the type of decision appealed, the processing of an appeal can take up to two years.
Regarding appeal stages, in Chile there is only one appeal stage and this second instance tribunal is allowed to review both factual and legal issues. Having said this, exceptional remedies are available in Chile and it is possible to challenge the decision of a second instance tribunal through, for example, cassation (which would be heard by the Supreme Court).
There are no discovery obligations in Chile, but the parties are free to submit evidence based on documents, witnesses, parties' confessions, inspections ordered by the court, expert reports and presumptions.
In respect of insurance and reinsurance disputes, under the New Insurance Law, ordinary courts and arbitration courts are entitled to take the following specific measures in relation to evidence issues:
- at the request of a party, to accept means of proof in addition to those pointed out above;
- to declare evidentiary measures ex officio at any stage in the trial;
- to request recognition of documents and deal with objections; and
- to assess evidence under the 'sane critic' doctrine.
Except for minor expenses associated with service, paperwork and auxiliary officers, there are no court fees payable in Chile. As to lawyers' fees, they can be recoverable, but only if the judge rules that there was no reasonable basis to litigate.
Format of insurance arbitrations
The Tribunal Code establishes the general rules for arbitration under Chilean law.25 These rules are complemented by the procedural rules contained under the Civil Procedure Code.26 Furthermore, Article 222 of the Tribunal Code establishes that 'arbitrators are the judges appointed by the parties or by a judicial authority for the resolution of a litigious matter'. Article 223 of the Tribunal Code provides that there are three types of arbitrator, as follows: arbitrators at law, arbitrators ex aequo et bono (friendly mediators) and mixed arbitrators.
Arbitrators at law are arbitrators who must render a judgment, in accordance with the positive law. The judgment must fulfil all the formal requirements established for judgments rendered by the ordinary courts. In addition, the procedure through which the matter is resolved must be in accordance with the law that would be applicable to the claim had it been brought before the courts.27 Arbitrators ex aequo et bono are arbitrators who are authorised to resolve a conflict in accordance with what they deem to be prudent and equitable. With respect to the formalities of the judgment and the formalities relative to the procedure, these arbitrators must submit themselves to the procedures agreed by the parties that appointed them.28 Finally, mixed arbitrators must render a judgment according to the positive law, but they may abide by the rules agreed upon by the parties.
It is not necessary to fulfil any special requirements to act as an arbitrator and only arbitrators at law and mixed arbitrators have to be lawyers.29
In the context of insurance disputes, where the parties have reached an agreement as to who the arbitrator should be, that arbitrator shall be appointed as an arbitrator ex aequo et bono. If there is no agreement, the appointment must be performed by an ordinary civil court. If so, the formalities commence with a petition to appoint an arbitrator and end with a resolution issued by the aforementioned court appointing the arbitrator as a mixed arbitrator. The procedural rules to be applied during the arbitration are settled in a subsequent hearing before the appointed arbitrator.
Procedure and evidence
Unless the parties agree something different or use institutionalised arbitration, the arbitration procedure is usually based on the Chilean rules of general procedure.
Local arbitration centres work based on a public fees scale subject to quantum. Ad hoc arbitrators also negotiate their fees based on quantum, but do not necessarily follow the guidelines of the arbitration centres.
iv Alternative dispute resolution
Apart from arbitration, in Chile there are no other industry-specific settlement alternative dispute resolution (ADR) mechanisms. In addition, ADR is not used often in the context of insurance disputes.
Mediation is not compulsory. However, prior to entering the evidence stage, Chilean courts are obliged to call for a conciliation hearing, whose main aim is helping the parties to achieve settlement.
Year in review
Law No. 21,210 of 24 February 2020 established that remote remunerated services provided by non-residents not domiciled in Chile, must pay value added tax (VAT) from 1 July 2020. This tax obligation is only for foreign taxpayers without domicile or residence in Chile who provide remote services to be used in Chile's national territory by natural or legal persons who are not VAT taxpayers.
As regards its impact on insurance contracts agreed outside Chile, the general position can be summarised as follows:
- Premiums paid for insurance contracts agreed outside Chile are subject to a 22 per cent withholding tax and exempted from VAT. However, under the new regulations, VAT would apply provided that the premium (1) is related to services rendered or used in Chile and (2) is exempted from the 22 per cent withholding tax because of the application of laws or treaties to avoid double taxation.
- The cases expressly exempted from the 22 per cent withholding tax remain the same, namely those related to premiums paid in connection with (1) hull and machinery (H&M) insurance, protection and indemnity insurance (P&I), freight and other insurance related to the maritime industry; (2) aircraft, freight, P&I and other insurance related to the air navigation industry; (3) insurance and reinsurance related to export credits; and (4) insurance and reinsurance related to guarantee payments of obligations towards third parties arising from the financing of concessionaires of public ports.
- Reinsurance remains subject to a 2 per cent withholding tax.30
- In addition to those at point (a) above, the cases expressly exempted from VAT remain the same, namely those related to premiums paid in connection with (1) import or export cargo insurance, H&M and risks for assets located abroad; (2) earthquake risks; (3) air navigations risks within Chile; (4) reinsurance; and (5) adjustable life insurance.
Given that the VAT changes are relatively recent and as yet there are no guidelines available, this summary proceeds from a conservative standpoint. In this respect, the IRS may in future issue resolutions or guidelines that help to clarify how these changes actually impact the insurance industry.
Outlook and conclusions
Owing to the October 2019 civil unrest in Chile, policies providing or excluding related risks, such as civil disturbance, civil commotion, looting or terrorism, among others, are being tested by local adjusters and courts. This also includes the testing of aggravation clauses, limits and sub-limits wording and deductibles. In addition, it remains to be seen how local policies will deal with the effects of the covid-19 pandemic, particularly in relation to business interruption.
1 Ricardo Rozas is a partner at Jorquiera & Rozas Abogados (JJR Abogados).
2 Title XIII.
3 According to Article 16 of the Insurance Companies Act (DFL 251), the Lloyd's of London insurance market is expressly recognised as a reinsurance entity.
4 Law 21,000 published in the Chilean Official Gazette on 23 February 2017. Decree Law No. 3,538 of 1980 that regulated the SVS was also modified to allow the replacement of the latter by the CMF.
5 Transitory Article 4 of Law No. 21,000 established that the CMF would commence to function on 14 December 2017 and that the SVS would cease to exist effectively by 15 January 2018.
6 Article 4 DFL 251.
7 Matter regulated under Title XIII of the Chilean Corporations Act.
8 DS 1055-2013 came into force on 1 June 2013.
9 Article 1560 et seq.
10 Article 524 No. 1 of the Chilean Code of Commerce (the Code of Commerce).
11 Article 525, Paragraph 1 of the Code of Commerce.
12 Article 525, Paragraph 2 of the Code of Commerce.
13 Article 525, Paragraph 3 of the Code of Commerce.
14 Article 525, Paragraph 4 of the Code of Commerce.
15 Article 525, final paragraph of the Code of Commerce.
16 Article 539 of the Code of Commerce.
17 Article 524 No. 5 of the Code of Commerce.
18 The 30-day term is counted from the time the insurer has knowledge of the aggravation of risk.
19 Article 1560 et seq.
20 Article 3(e) Paragraph 3 DFL 251.
21 Article 513(l) of the Code of Commerce.
22 According to Article 58 bis DFL 251, foreign brokers may trade insurance cover in Chile in connection with international marine carriage, international commercial aviation and goods under international transit.
23 Article 58(d) DFL 251.
24 According to Article 58 bis DFL 251, non-registered foreign brokers may sell direct insurance cover in Chile in connection with international marine carriage, international commercial aviation and goods under international transit provided that they are based in a country with which Chile has an international treaty in force that allows such insurance to be taken out from that country.
25 Title IX, Articles 222 to 243 of the Tribunal Code.
26 Title VIII of Book III.
27 Article 223(1) of the Tribunal Code.
28 Article 223(2) of the Tribunal Code.
29 Article 225 of the Tribunal Code.
30 In the case of the United Kingdom, liability to this tax would be exempted, subject to compliance with the double taxation treaty.