Senoras y senores
Thank you for coming to today’s lunch. We meet under very sober circumstances and I would like to express, on behalf of the Lloyd’s market, my sympathy to all of the victims of the terrible earthquake which Chile suffered in February.
I would also like to express my absolute confidence in the ability of this country to recover from this tragedy.
In January of this year, as we welcomed in a new decade, Chile was facing a bright future. 2010 is the bicentennial anniversary of Chile’s independence from Spain. Economists expected the year would mark the country moving back into growth, after the global recession. Membership of the OECD was secured, and demonstrated beyond any doubt that Chile was one of the top performing economies in Latin America. For over a decade, Chile has been a trail blazer in this region. The first Latin American country to privatise state enterprises and the first to liberalise its economy. The new government looked set to consolidate on the past successes which had led to a doubling of per capita income.
Then, on 27 February, the earthquake struck, causing huge devastation.
The earthquake has, of course, affected many people’s lives. Homes and businesses have been lost, but Chile’s reputation as a regional leader, as an attractive market, remains in tact. We are now in a difficult period of reconstruction and the insurance industry will play a central role in this process.
Lloyd’s is closely involved. We estimate that around 20-25% of the losses will fall upon the Lloyd’s market, a sum of around $1.4 billion.
Like everyone else, we are keen to see the losses processed efficiently and fairly and we want to work closely with our partners in the Chilean insurance industry to ensure that this happens. Many of you will have met the delegation from Lloyd’s who visited last month, once the situation had settled. I know that my colleagues found this a very useful visit, and that a considerable amount of progress was achieved. I also know that the delegation left with a high regard for the professionalism of the Chilean insurance market. It is a real testament that, despite difficult circumstances, you have maintained these high professional standards.
I would like to thank you for the information which you have supplied to Lloyd’s and encourage you to maintain a productive dialogue with us, as we work through the claims. These represent a daunting workload. 210,000 claims represent about 100 months worth of business during normal times. Please be honest and frank with us about how we are supporting you, what we are doing well, and what we could do better. As one of the world’s leading reinsurers, we have faced many catastrophes – we were a major insurer of the World Trade Center in New York and covered many of the losses incurred after hurricane Katrina hit the gulf states in the America. But I want Lloyd’s to learn from every disaster so we can improve our response to the next.
One of the cornerstones of our reputation is that we pay valid claims. Where the terms and conditions of the reinsurance contracts are met, we will pay all the claims. There is no question of our ability to do so, the Lloyd’s market is in good heath, and possesses the capital to meet these claims.
We are keenly aware that our role is to support businesses when they are faced with a disaster. That is why we exist. And businesses – in Chile and elsewhere - have had a difficult few years. In 2008 and 2009, they were faced with the challenge of the financial collapse. And now, in 2010, businesses across the world have been affected by natural disasters. There have been terrible earthquakes not just in Chile, but also in Haiti and China. And, in Europe, many businesses were affected by the ash from a volcano cloud closing airports for days on end.
If 2008 required businesses to look at how they manage their financial risks, 2010 has been a reminder that we cannot forget our vulnerability to acts of God. And I think that, on both counts, Chile has shown a considerable level of resilience. The response to the financial crisis was strong and growth has returned, and I believe that the Chilean earthquake also shows that it is possible to limit our exposure to natural disasters.
I have been struck by the fact that the earthquake in Chile, whilst a terrible tragedy, caused less devastation than the earthquake in Haiti.
So I looked into why this was the case.
There are a number of reasons. A major reason is that the focus of the Haiti earthquake was close to its capital Port-au-Prince. But an important aspect is simple economics and, unsurprisingly, preparation. Haiti is the poorest country in the Western Hemisphere, whereas Chile is one of the most prosperous in South America. Buildings here contain reinforced concrete and structured steel frames designed to withstand an earthquake. Also, because the Chilean economy is in robust shape, it can withstand this shock. The fact that there is a much higher take up of insurance in Chile, than in Haiti, will also help the process of rebuilding the affected areas.
After every disaster, questions are asked and debates emerge over what went wrong, what systems failed. That is only natural, and we have to ask these questions in order to improve. But it is also clear that the foresight shown by the Chilean authorities and builders in the materials used to construct many buildings has saved life.
My final message to all of my colleagues and partners here in Chile is that, whilst this is a highly stressful period for the insurance market here in Santiago, we must work closely together as each individual claim is processed, we must stay in close contact and, throughout this process, we must learn how to improve processes and systems.
You can be sure that the Lloyd’s market is determined to support you in these difficult times.
I wish you all success for the future and I am confident that the bicentennial celebrations will show the world that Chile has a very bright future. Lloyd’s is a little older than Chile, our market is over three hundred years. In fact, just a few years before Bernard O’Higgins asked Lord Cochrane to command the Chilean navy during your war of independence, the Lloyd’s Patriotic fund, which still exists, awarded Lord Cochrane’s uncle, also an admiral in the British Navy, with a vase to honour his achievements in a battle in the Caribbean. Back then, when Chile was winning its independence most of our business was in the marine trade. However we have diversified, not simply in terms of what we insure, but also in terms of where we insure. And I predict that with its strong growth and stable economy, Chile will become an ever more important market for us.
Senoras y senores, espero que disfruten de la comida [bon appétit]!
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i For more information on this, see BBC report here: http://news.bbc.co.uk/1/hi/8543324.stm
