Insurers could sue Chile in international courts

Insurance companies warn Chile that could go to court if a bill is passed that allows people to demand advance payments of their annuities.

Principal Financial Group has initiated formal consultations with Chile, a process stipulated in international trade agreements, due to losses arising from the legislation on pension withdrawal. In the future, the company could sue the country in international courts.

In addition to allowing Chileans to use their individual pension accounts, legislators have allowed people to require insurers to return 10% of the funds they paid when purchasing annuities, with a cap of around US $. $ 5,500.

So far, Chileans have withdrawn nearly $ 50 billion in pension savings, while insurers have had to pay more than $ 1 billion in annuity accounts. Unlike the pension funds Keeping individual accounts separate from those that sell assets to raise money, life insurers have had to sell securities from their own balance sheets to pay.

The move is increasing liquidity risks for companies, insurance regulator Joaquín Cortes said in a presentation this week. The bill now being approved by congress will allow a fourth round of advance payments and seven local insurers would not have enough funds to pay, the regulator said.

Ohio National and Zurich Insurance Group have already started consultations on the same topic.