Insured losses resulting from the El Niño coastal phenomenon (FEN) totalled US $660 million for the period ending June 2018, although 89.02% of this figure was absorbed by the international reinsurance markets, according to Peru’s Superintendency of Banking and Insurance (SBS).
“The reports presented by Rímac Seguros, La Positiva, Mapfre Perú, Pacífico Seguros and Chubb Peru, as of June of this year, show that the claims reserve, which measures the estimated losses updated, reached 660 million dollars for the losses caused by the FEN,” said the SBS.
El Niño refers to a band of warm ocean water that occasionally forms off the Pacific coast of South America. It can affect fishing and agriculture, and often causes flooding or drought.
The Peruvian regulator explained that the 87% of the insurance reserve was used to cover incidents relating to fire insurance policies and allied lines, while the remainder related to risk for contractors, multi-insurance policies, agricultural insurance, and other branches.
The SBS said that Lima was the city with the highest level of claims (38%) due to its concentration of insured risks, followed by Piura (31%) and La Libertad (18%).
In total, Peruvian insurers registered 16,587 claims relating to El Niño, of which 15,129 (91%) had been dealt with at June 30, 2018, representing $428 million (65%) of total anticipated compensations.
The compensation shortfall reflects the complex processes required to evaluate larger claims, such as in cases of Profit Dismissed losses, where it is necessary to interrupt the activities of an insured company to determine the compensable loss, the SBS explained.
However, Peru’s national insurance system is only expected to retain 10.92% of insured El Niño losses, with reinsurance contracts ensuring that the remaining 89.08% is absorbed by the international reinsurance market.
The SBS added that it will continue to support efforts to expand insurance penetration in Peru, in order to build the country’s resilience to catastrophic events and to help its economy recover quickly.