CHILE Law and Practice Contributed by: Ricardo Rozas, Max Morgan and Stefano Perretta, JJR Abogados
This notwithstanding, foreign insurers that are incor- porated abroad may commercialise and sell direct insurance cover in Chile relating to international marine transportation, international commercial avia- tion, and cargo in international transit and satellites. In addition, companies incorporated abroad are allowed to establish branch offices in Chile. These branch offices are subject to the general procedure provided by the Chilean Corporations Act for the incorporation of agencies of foreign companies, and must obtain authorisation from the CMF (as per Titles XI and XIII of the Chilean Corporations Act). In addi- tion, the branch offices must prove to the CMF that they comply with all requirements established for the authorisation of insurance companies, and must fol- low further publication and registration formalities. Reinsurance of contracts subscribed to in Chile is contracted by insurance and reinsurance companies with the following entities: • national corporations whose exclusive scope of business is reinsurance; • national insurance companies that can only rein- sure risks from the group they are authorised to operate in; and • foreign reinsurance entities that are classified by two different risk classification agencies approved by the CMF and ranked at least within the BBB risk category or its equivalent. Reinsurance can be provided by the aforementioned foreign reinsurance entities either directly or through reinsurance brokers registered in the Registry of For- eign Reinsurance Brokers, which is managed by the CMF. No different rules apply to the underwriting of excess layers or to reinsurance contracts. Product Regulation Insurance and reinsurance companies must word their contracts using the models of policies and clauses contained in the Register of Policies of the CMF. Exceptionally, they may use non-registered models where:
• they relate to general insurance; • the insured or the beneficiary is a legal entity; and • the annual premium is higher than 200 Chilean UF ( Unidad de Fomento , an indexed unit of account) (eg, in the case of large risks). In addition, non-registered models can also be used for cargo, transport, marine or aircraft hulls, or related insurance. Areas of compulsory insurance cover in Chile include: • motor liability; • employers’ liability for occupational accidents and diseases; and • brokers’ errors and omissions. In addition, Decree-Law 3500 of 1980, which regu- lates the Chilean pension system, also establishes a compulsory insurance in connection with, inter alia, disability and social security life annuities to be con- tracted jointly by all companies authorised to manage the covering pension funds. Standards That an Insurer Must Satisfy The minimum capital of a Chilean insurance company must be 90,000 Chilean UF. In the case of Chilean reinsurance companies, this is 120,000 Chilean UF for any of the authorised groups in which they may operate. To meet the obligations of underwriting insurance and reinsurance business, Chilean-regulated insurers and reinsurers must establish technical reserves in accord- ance with the current principles, procedures, mortality charts, interest rates and other technical parameters within the time limit and in the format established by the CMF through general rules. 2.3 Taxation of Premium Generally, if the insurance is contracted in Chile, its premium is subject to a 19% value-added tax (VAT). If the insurance is contracted abroad (owing to the insured’s decision), the premium is subject to a 22% withholding tax and is exempted from VAT (a couple of cases are exempted from the aforementioned with- holding tax, such as protection and indemnity (P&I)
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