MetLife joins insurers that could sue Chile

MetLife Inc. initiated formal consultations with Chile on proposed legislation that would allow individuals to demand advance payments of their annuities, a step that could ultimately lead to litigation.

The largest insurer in the United States told its Chilean regulator on Thursday that the losses arising from the pension withdrawal legislation combined with the threat posed by new legislation had led it to begin a consultation process with the country that is stipulated in the international trade agreements.

“We were hoping to avoid this action and are sorry to have to take it“, said MetLife it’s a statement. “However, given the damage caused by recent legislation and the potential for additional proposals to further harm our clients, shareholders, and the long-term health of Chile’s annuities and pension systems, we were left with no choice but to act.”.

MetLife joins two other US-based insurers operating in Chile, Principal Financial Group and Ohio National, which have already entered the consultation process, as has the Swiss-based Zurich Insurance Group.

In addition to allowing Chileans to use their individual pension accounts, legislators have allowed people to require insurers to pay them 10% of the funds they paid at the time of 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So far, Chileans have withdrawn nearly $ 50 billion in pension savings, while insurers have had to pay more than $ 1 billion in annuity accounts.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 pension funds that maintain separate individual accounts from those that sell assets to raise money, insurers have had to sell securities from their own balance sheets to pay.

The move is increasing liquidity risks for companies, insurance regulator Joaquín Cortez said in a presentation last 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.