Chile Finalizes Major Earthquake Insurance With World Bank

Chile is finalizing a deal with the World Bank for insurance against high-intensity earthquakes that will impact the country’s fiscal policy and public debt, the Ministry of Finance said on Thursday.

“The insurance will enable Chile to receive pre-determined compensation payments, in the event of a certain high-intensity parameter seismic event that causes material damage to the country and public finances,” the ministry said in a statement.

The specific conditions of the insurance will be disclosed once these financial operations are completed, which will eventually happen in the coming weeks.

The government said that studies to design a different financial insurance structure with the World Bank – through the International Bank for Reconstruction and Development (IBRD) – started in June 2022.

Chile is prone to such earthquakes located on the so-called Pacific Ring of Fire. It has been hit by some of the strongest recorded earthquakes in the world, including a record one A magnitude 9.5 earthquake in 1960 south of the city of Valdivia.

South American country also hit a devastating earthquake and tsunami of magnitude 8.8 in 2010 that killed more than 500 people.

The government says the IBRD intends to issue catastrophic bonds, or cat bonds, that replicate the policy’s scope structure.

(Reporting by Fabian Andrés Cambero; editing by Sandra Maler)

Topic
Earthquake Disaster Natural Disaster