CHILE Law and Practice Contributed by: Ricardo Rozas, Max Morgan and Stefano Perretta, JJR Abogados
5. Distribution 5.1 Distribution of Insurance and Reinsurance Products Insurance products must be sold mainly in accord- ance with the CMF regulations and the Consumer Protection Act. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer Under Chilean law, the insurer’s main obligation is to pay the indemnity, provided that there is coverage. The insured is subject to the following obligations: • sincerely stating all circumstances required by the insurer to identify the insured object and risks; • reporting about other insurances covering the same object, if required by the insurer; • paying the premium in the agreed manner and term; • acting as the diligent head of family for preventing a loss (in the case of an imminent loss, the insurer must reimburse the expenses reasonably incurred by the insured to comply with this obligation); • not aggravating the risk, and informing the insurer in a timely manner about circumstances that may constitute an aggravation; • adopting all measures to save the insured object or keep its remains (the insurer must reimburse the expenses reasonably incurred by the insured to comply with this obligation); • notifying a loss to the insurer as soon as feasible upon knowledge of the occurrence of any circum- stance that may constitute a loss; and • establishing the occurrence of the loss and sin- cerely stating, with no reticence, its circumstances and consequences. As regards the insurer’s obligation to reimburse per the fourth and sixth point above, such reimbursement cannot exceed the insured amount. Chilean law recognises the concept of utmost good faith, and the insured must respond to an insurer’s request for information about a risk by honestly dis- closing the information requested, to allow insurers
and hull and machinery (H&M) insurance). Reinsur- ance is subject to a 2% withholding tax.
3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers Anyone is free to take out insurance in Chile. Except for compulsory insurance, taking out insurance abroad is not forbidden, though insured parties are subject to the legislation governing international charges and taxation. 3.2 Fronting Foreign insurers cannot sell insurance directly in Chile (exceptionally, they can do so in connection with inter- national marine transportation, international commer- cial aviation and cargo in international transit). Fronting is not expressly defined under Chilean law; however, the foregoing is an accepted practice, not- withstanding the fact that the cedant company will always remain as the party responsible to pay the indemnity to the insured under the local policy. Direct actions of the insured against the reinsurer are not val- id unless otherwise agreed in the reinsurance contract or as per an assignment of rights after the loss from the reinsured to the insured. In this respect, under Chilean regulations the insurer cannot postpone the payment of the indemnity to the insured due to the existence of a reinsurance contract. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies The transfer of business or portfolios and mergers or divisions of insurance entities require special authori- sation from the CMF, and must be carried out in con- formity with the general rules established by it for this purpose. In any case, the insured must be informed, and the conditions of the transfer may not encumber their rights or modify their guarantees.
70 CHAMBERS.COM
Powered by FlippingBook