Fitch has placed all of the insurance companies in Chile that it covers on a general credit watch over worries about the weakened state of the local market and concerns over the resulting decline in their financial strength.
According to a report carried on the Bnamericas website the rating agency has become increasingly worried over the generally weak performance of the Chilean insurance market during the last several years following the Sept. 11 attacks and the consequent rise in reinsurance rates.
Chilean P/C insurers have suffered mainly due to increased competitive pressures, while the life sector has seen growing losses from annuities.
The country also suffers from being next door to Argentina, which is going through one of the worst economic crises in its history, with many global insurers exiting the market and reducing or entirely ending the support they give to local subsidiaries.
However this appears to be a far less serious problem in Chile. According to the Bnamericas’ report, Fitch’s locally-based analyst, Rodrigo Salas, indicated that, “In Chile the parent companies are up to date on what is happening at their subsidiaries. They back their subsidiaries, although they haven’t been tested.”
The report noted that Fitch had reduced the categories of risk assigned to the companies and has adjusted its ratings for the Chilean industry to best reflect the existing level of risk.
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