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Chilean government advised on catastrophe bonds


Since the February 2010 earthquake, the Chilean government has been actively looking for ways to improve their disaster risk financing both for the financial management of catastrophe risks and for their ability to recover post disaster. Last week the Organization for Economic Cooperation and Development (OECD) responded by holding a roundtable meeting on the Financial Management of Earthquakes at their headquarters in Paris.

The meeting brought together experts on catastrophe risk management from the public sector, industry and leading research institutions to provide analysis and advice to the Chilean government to empower them to create a viable catastrophe risk management and financing plan.

One of the attendees invited to take part in the meeting was a well known figure from the catastrophe bond and insurance-linked securities market, Peter Vloedman. Mr Vloedman, CEO of Anchor Risk Advisors, a specialist insurance-linked securities investment manager, was invited due to his long standing experience within the cat bond and ILS market.

Mr Vloedman gave the Chilean government representatives an insight into catastrophe bond and disaster risk financing opportunities.

“I was honored to be invited to a meeting that has the potential to improve the lives of Chile’s citizens in the aftermath of future catastrophes,” Mr. Vloedman said. “Our involvement is an example of Anchor’s commitment to helping the victims of catastrophic events.” Dr. Erwann Michel-Kerjan, the Chairman of the OECD’s High-Level Advisory Board on the Financial Management of Catastrophes, said, “Pete’s broad experience since the early days of catastrophe risk securitization provided valuable insight into addressing the Chilean government’s risk financing needs.”

This isn’t the first time we’ve heard about Chile’s interest in catastrophe bonds and alternative risk financing techniques. We wrote in September 2010 about the interest their insurance regulator was showing in the instruments. Chile would seem a great fit for the MultiCat cat bond model which the World Bank promotes and we’re sure the Chilean government will have discussed this with them.

It’s not just the Chilean government who could be looking at cat bonds. As Chile continues to develop rapidly and the value of exposed property in the country increases, insurers and reinsurers who are active there must be aware that earthquakes pose a growing risk to their profitability. It may only be a matter of time before a cat bond is issued covering Chilean earthquake risk.

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