COUNTRY INFORMATION 1

CHILE

COUNTRY INFORMATION 2

Chile has 16.7 million inhabitants and has an area of 292,258 square miles (756,945 square kilometres), which includes , Juan Fernandez archipielago and San Ambrosio, San Felix and Sala islands. The country also lays claim to around 490,240 sq. miles (1,269,723 sq km) of Antarctic territory.

CAPITAL CITY: is the capital city. Other major cities include Valparaiso, Concepcion, and .

CURRENCY: The currency unit is the peso, referred to as CLP in this report. The UF (Unidad de Fomento) is a monetary unit used in Chile for business transactions, including insurance premiums, which through periodic indexing, adjusts the peso value to inflation. When this report was in preparation the exchange rate was UF 1:USD 44.58

EXCHANGE RATE: CLP 520,89 = USD 1.00 (UF 1 = USD 45,06) (15/11/2013).

LANGUAGE: The official language is Spanish. English is spoken by many Chileans, especially those in the business community.

LIFE EXPECTANCY: Life expectancy at birth is 76.1 for males and 82.8 for females.

RELIGION:. Basically Roman Catholic, but all other are accepted and respected

INDEPENDENCE DAY:. 18/09 of 1810 CHILE

POLITICAL /ECONOMICAL CHANGES 23

POLITICAL CLIMATE

• Sebastián Piñera is the current President of the Republic of Chile and belongs to the center-right coalition.

• Mr. Piñera has been a successful entrepreneur in different areas of economic activity in our country and also was Senator of the Republic between 1990 and 1998

• This year 2013 in the month of December will be the ballotage between and Evelyn Matthei to choose the new for a period of four years

INTERNATIONAL RELATIONS

Chile's relations with its neighbours, has been normally very good, even there are allways som trends. Chile may be expected to continue to try to strengthen its political and economic relations with the rest of Latin America by working towards accelerating progress towards a Free Trade Area of the Americas (FTAA). Chile has Free Trade Agreements with Canada, , South Korea, , USA, , Singapore and Brunei, China, , Norway, Switzerland, , Turkey, Malaysia, Middle America among others Chile is a member of all major international organisations, including the International Monetary Fund and the United Nations and is likely to be admitted as a member of the OECD in the near future. Currently, the General Secretary of the OEA is Mr.Jose Miguel Insulza

La Moneda: Presidential Palace CHILE

POLITICAL /ECONOMICAL CHANGES 24

ECONOMY

Economic Structure Chile is endowed with rich mineral resources. It is the world's number one producer of copper, molybdenum and iodine, and a substantial producer of nitrates, gold and silver, among other metallic and non- metallic mineral products. Exports of basic commodities such as copper, timber, fish, fruit and vegetables remain an important source of revenue. Chile Economic Outlook: * In Chile, growth will slow toward potential in 2013, at 5%, with some moderation in domestic demand, particularly in investment. We expect growth in 2014 to be 4.7% * Inflation kept below the Central Bank’s tolerance range by transitory factors. At the close of 2013 it should come in at 2.5% and within the target range in 2014 * The balance of domestic and external risks will extend the Central Bank’s pause through the rest of 2013. We expect a brief cycle of rises in the first half of 2014, given expectations that liquidity measures will begin to be withdrawn in developed economies * The risks for the Chilean economy are related to adverse events in developed economies and effects on economic activity in important emerging markets such as China. Domestic risks are associated with strong domestic demand putting pressure on medium-term inflation

La Moneda: Presidential Palace Economic Trends

•Gross Domestic Product 2012GDP 5 •CLP mn)126,681,591.2 (USD mn)264,692.5 •GDP Growth 6,0% (2001) 5,6% (2012) •GDP per capita USD 15,960

Inflation was 1.2% in 2012, With regard to interest rates, in October 2013: The deposit rate was 5.10%; The lending rate 9.12%; The discount rate 5.00%; The money market rate 5.00%. The unemployment rate in December 2012 was 6,2%. 6 Chile is well know for:

• The best fresh fruit • High quality and price relation WINES • Largest Cooper exporter and a highly developed mining sector • Political, economical and social stability • The driest desert in the world and most of the world climas in 1 country • Good food • Friendly people CHILE

NATURAL HAZARDS 7

Earthquake • Chile has a history of recorded earthquakes going back to 1570, and the country experiences hundreds of tremors of varying intensity every year. The area of Concepcion has been particularly susceptible to both land and undersea seismic events, and several areas of the country are geothermically active. Sub- soil conditions in the major areas of Santiago and Valparaiso are good.

• The 2010 Chile earthquake occurred off the coast of central Chile on Saturday, 27 February 2010, at 03:34 local time, having a magnitude of 8.8 on the , with intense shaking lasting for about three minutes. It ranks as the sixth largest earthquake ever to be recorded by a seismograph. It was felt strongly in six Chilean regions (from in the north to Araucanía in the south), that together make up about 80 percent of the country's population

• The earthquake triggered a which devastated several coastal towns in south-central Chile and damaged the port at . Tsunami warnings were issued in 53 countries CHILE

NATURAL HAZARDS 8

• The Chilean government estimated economic losses from the earthquake and tsunami of 2010 in USD 30,000 million, being the most affected sectors industry, fisheries, tourism, housing and education. Of these losses, 71% were destroyed infrastructure. In the insurance industry, the main damage refers to damage to buildings. • The Insurers received 222,416 claims and losses paid were around MMUSD 8.000

• After the event 27 F the earthquake rates had increased but today are on the same level that were before 27 F • Earthquake cover, including fire following, is given as part of the additional perils issued in conjunction with the standard fire policy. Companies have different attitudes to pre-code structures but many are not prepared to accept them. An overall rate is generally quoted for fire and earthquake and, as competition is keen, the earthquake element is frequently offered for a very low premium. A deductible of 2% of the sum insured applies per location, for industrial and commercial risks, and for homeowners' risks, a deductible of 1% of the sum insured applies.. CHILE

NATURAL HAZARDS 9

Windstorm • The area most susceptible to high winds and heavy rain is the extreme south of the country around Tierra del Fuego, which is a very sparsely populated and inhospitable region. Windstorm is not covered as part of the standard fire policy but under the extended coverage clause, and cover is freely given. The rate, which is minimal, is included in the overall extended coverage rate. Deductibles applicable will in most cases be those applying to all other perils.

Flood • Flood is an increasing cause of concern to insurers in Chile as the frequency of flooding is increasing. The areas most exposed are parts of Santiago, and the coastal areas of Vina del Mar and Valparaiso, and some areas are avoided by insurers. Flood is not covered as part of the standard fire policy but under the additional perils extension. Deductibles applicable will in most cases be those applying to all other perils, unless there is a particular exposure.

Other Perils • There are no other significant perils of nature affecting the market. CHILE

INSURANCE MARKET 1 0

Total Market 2012: USD 11,4 Billion. Written premium income for the Chilean market (P&C + Life)

• During 2012, the insurance market as a whole reported total sales reaching USD 11.399 million, which represents a real increase of 6.6% over the same period last year, and total earnings of USD 864 million, reflecting an actual increase of 103.4% compared to the previous year.

• Between January and December 2012, the life insurance market showed an increase in real terms of 7.4% in sales compared to the same period last year, reaching USD 7.497 million, while the sales of general insurance market expanded 5.1% in the same period, reaching USD 3.902 million CHILE

INSURANCE MARKET 1 1

In terms of investments up to December 31, 2012, the portfolio of companies mainly consisted of domestic fixed income lines, both in life insurance and in general, with 68.6% and 76.4% respectively of total portfolio.

• Sectioned by group, the life insurance market generated a net income of USD 757.9 million, while the general insurance market profited with USD 106.1 million. The figure of life is significantly better than the results observed in the previous corresponding period, which was mainly due to an increase in profit from financial investments. The general outcome is slightly lower than 2011, due to higher administrative costs and claims, despite the improvement in investment income. CHILE

INSURANCE MARKET 1 2 NON LIFE INSURANCE 31.12.2012 Currency MUSD Line of Business Gross Premium Part. (%) Fire and perils 1.406.508 36,05% Motor Vehicles 999.450 25,61% Cargo 136.078 3,49% Liability 165.764 4,25% Engineering 172.728 4,43% Others 1.021.357 26,18% Total 3.901.885 100,0%

LIFE & HEALTH INSURANCE 2012 Currency MUSD Line of Business Gross Premium Part. (%) Individual 918.694 12,25% Group 1.829.386 24,40% Pension Insurance 4.749.209 63,35% Total 7.497.289 100,00% CHILE

INSURANCE MARKET 1 3 NON LIFE Currency MUSD YEAR 2012 Company RSA 540.843 Mapfre 427.008 Penta Security 394.214 BCI 392.713 Liberty 339.319 A. Magallanes 300.175 Chilena Consolidada 250.844 Otros 1.256.769 Total 3.901.885

LIFE & HEALTH Currency MUSD Company YEAR 2012 Metlife 1.112.782 Consorcio Nacional 665.199 Chilena Consolidada 628.865 Corpvida 590.451 BICE 462.793 Sura 360.341 Penta 332.257 Security Previsión 329.999 Otros 3.014.600 Total 7.497.287 CHILE

INSURANCE MARKET 1 4

.

Gross Premium Life & Health

12%

25% Individual 63% Group Pension Insurance CHILE

COMPULSORY INSURANCE 1 5 • Workers' compensation (state scheme). arranged through specialist mutuals.

• Personal accident insurance for schools (seguro escolar) - pupils are covered by the state in a similar manner to the workers' compensation scheme.

• Personal accident insurance for security companies

• Environment Bonds (some cases)

• Third party personal accident insurance for motor vehicles, known as SOAP (Seguro Obligatorio de Accidentes Personales).

• Insurance against oil pollution from ships.

• Various insurances and/or guarantees for insurance brokers, stockbrokers, pension fund administrators and loss adjusters.

• Third party insurance for commercial aviation operations.

• Pensions contributions are mandatory, although the insurance sector is only involved in the eventual offer of annuities to provide the resultant pension. Healthcare insurance is also mandatory and may be contracted through the state (FONASA) or the privately operated healthcare companies (ISAPREs).

• Unemployment Insurace for employees with contracts beginning in the year 2000. The insurance is paid for by de employee, the employer and subsidized by the state.

• Debtor Insurance in Mortgage Loan Operations

• Fire and Earthquake Insurance in Mortgage Loan Operations

• Cargo Insurance for import and export CHILE

617 ISSUES / TRENDS IMPACTING THE 6 INSURANCE BUSINESS

• From the month July 2012 took effect the law that requires to lenders of mortgage financing, to tender the policies of Fire and Earthquake and Credit Life to tender in the insurance market

• Non-Life, although in recent years it have incorporated new companies like Orion, QBE Chile, and other specialized in trade credit insurance, the market (26 insurers) is dominated by the top 5 companies that represent a 54 % of the gross premium

• Life & Health, by year 2013 it is estimated a growth of life and health insurance market of 4.50%. Metlife company remains 1 of the market, the Security company goes to the 4th place after to buy the Company Cruz del Sur CHILE

617 NON ADMITTED AND OTHER 7 INSURANCES ISSUES-FAQ

• Is non-admitted insurance permitted ? No, non-amitted is forbidden unless there is special tax paid to the state ( 22% of the premium. • Are any type of non-admitted ? Yes, Cargo & Hull • Is reinsurance allowed in Chile ? Yes. A 2% reinsurance has to be paid • Are Difference in Conditions / Difference in Limits (DIC/DIL) policies common in your country, for instance DIC/DIL policies placed by an Insured’s head office e in North America or Europe? Yes, usually it is that way. CHILE

1 D & O ISSUES IN CHILE-FAQ 8

I. RULES AND REGULATIONS

1. Are public or private companies permitted to indemnify their directors for wrongful act? YES

2. Are there any significant restrictions on purchasing D&O coverage? NO

3. Are public or private companies permitted to provide defense for their directors for: a) Wrongful acts (general mistakes as directors) YES b) Criminal accusations YES c) Shareholder suits YES

4. Are public or private companies or individual directors required to purchase D&O insurance? NO

5. Are public or private companies or individual directors permitted to purchase D&O insurance for the company or for the directors? YES

6. Are companies permitted to pay the premium on behalf the coverage for the directors? YES

7. Are their any insurance rules pertaining to Directors and Officers Liability coverage? NO CHILE

1 D & O ISSUES IN CHILE-FAQ (cont.) 9

8. Must D&O insurance for a US multinational company include a local admitted policy in your country, or is a non-admitted policy from the US permissible? Chile is an non- admitted country market

II. MARKET 9. Are their D&O policies readily available in your country? If so, which insurers have this product? YES: CHUBB, AIG, ACE and LIBERTY

10. What limits are available directly in your market? There is a great capacity and if more is needed, the fac. market is available

11. Do you have a standard policy form or is it negotiable by each insurer? YES, There are some standard forms in the chilean market CHILE

2 D & O ISSUES IN CHILE-FAQ (cont.) 0

12. Is coverage purchased by clients in your market? If so, to what extent, how common, is it limited to public companies or multinational companies, etc? YES. It is more common every year, between pure local companies, multinational, but it is not limited to public companies

13. Would local insurers be willing to front for D&O policies issued in the U.S.? YES

III. EXPOSURE 14. Is there any prevalence or development of D&O claims in your country? Not really, but there have been some cases in the past and new are growing. The losses are catastrophic/not frecuent

15. What is a typical D&O premium in your portfolio if any (company type, limit, deductible)? Depends on each risk CHILE

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