Chile Finalizes Major Earthquake Insurance With World Bank

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

“The insurance would allow Chile to receive pre-established compensation payments, in the event of certain high intensity parameterized seismic events that cause material damage to the country and public finances,” the ministry said in a statement.

“The specific conditions of the insurance will be disclosed once this financial operation is completed, which would eventually occur in the coming weeks.”

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

Chile is prone to earthquakes as it is located in the so-called Pacific Ring of Fire. It has been hit by some of the strongest recorded earthquakes in the world, including a record 9.5 magnitude quake in 1960 in the southern city of Valdivia.

The South American country was also struck by a devastating 8.8 magnitude earthquake and tsunami in 2010 that left more than 500 dead.

The government said that the IBRD intends to issue a catastrophic bond, or cat-bond, that replicates the coverage structure of the policy.

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