Wednesday, June 21, 2017

The Evolving Role of the Claim Adjuster in Latin America

Borrowing a definition from the by-laws of the Chartered Institute of Loss Adjusters (CILA), a loss adjuster is “a person whose predominant activity is the investigation, management, quantification, validation and resolution of Property, Casualty or any other losses (whether insured or not) arising from any contingency and the reporting thereof”. 

The profession of loss adjusting came into being after the Great Fire of London in 1666. With the introduction of property fire insurance, independent surveyors began using their expertise to evaluate and settle claims. In 1941, prominent claims experts formed the Association of Fire Loss Adjusters, which later developed into “The Chartered Institute of Loss Adjusters” in 1961. 

It is difficult to say exactly when the loss adjusting profession commenced in Latin America but, by the early 1900s, associations of loss adjusters had been formed, such as the Mexican Adjusters Association (1935) and the Argentine Association of Insurance Adjusters and Experts (1937). In the past two decades, the insurance authorities of the different Latin American nations began to regulate the activity of loss adjusters issuing professional licenses or authorizations -which are now required in Argentina, Bolivia, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panamá, Paraguay, Peru and Venezuela.  

The “Traditional” vs. “Independent” Role of the Adjuster: 

In general, adjusters in Latin America are designated by the insurer with the main purpose of providing insight on a claim. Adjusters further contribute by participating in case-handling discussions and making recommendations. Written reports are directed to insurers and are not normally shared with any other party. Adjusters are expected to help protect the insurer’s rights against waiver, and will also typically represent insurers in negotiating and settling a claim within authorized limits as per their instructions. In short, in fulfilling their “traditional” role, adjusters may be viewed as working for insurers. 

But Peru and Chile have taken some legislative steps in another direction. As per the Peruvian Insurance Statute, the adjuster should be impartial and independent, and the insured has a right to participate in his/her appointment. The adjuster's findings are included in reports which are given to the insured and insurers for review at the same time. These rules are developed in more detail in Resolution 3202-2013 issued by the insurance regulator "Superintendencia de Banca y Seguros y Administradoras Privada de Fondos de Pensiones".  This Resolution sets out a procedure based on the adjuster’s final report, which should be issued within 20 days of receiving all necessary information and documents. Claim amounts are not negotiated by the adjuster as per instructions provided by insurers, but rather proposed to the parties in the context of the conclusions included in the reports that have been circulated to both sides. 

As mentioned, Chile has comparable rules, which also support adjusters’ independence and equal access by the parties to their work product.  

These rules have the adjuster assume a more neutral position, probably making his or her conclusions more difficult to overturn for either of the parties. While this legal framework certainly needs to be kept in mind and complied with, if the claim is handled professionally by knowledgeable individuals, the result should be satisfactory to all. 

Published by Daniel Baron*

*Not licensed to practice law in Florida

Wednesday, June 7, 2017

Mining Risks in Latin America: A Changing Landscape (Part 1)

Latin-America has some of the world’s largest mines. Chile’s Mina Escondida is the largest copper producing mine in the world. Mexico is the world’s largest silver producer. Chile is also posed to become the largest lithium producer in the world, while investors are eyeing 35 different lithium projects in Argentina.

As investments in mining continue to flow to the region at an incredible rate, local governments are stepping up regulatory requirements and enforcement. Mine workers are demanding better pay and working conditions. Local authorities are becoming more vigilant of pollution risks. In recent months, there have been several instances where these issues have resulted in the suspension of operations, penalties, and fines at large mines in Latin America.

In Argentina, after the third spill of cyanide solution in 18 months, the world’s largest gold miner, Barrick Gold, faces a steep challenge in its operations at its Veladero mine. After the second incident, mine operations were suspended for weeks, executives were indicted, and Barrick was fined a record $9.8 million. Following that incident, local authorities demanded the implementation of certain safety measures that would reduce the risk of similar events occurring in the future.

According to the judge overseeing cases related to Veladero, Barrick missed deadlines imposed by three orders from local authorities, including an order requiring Barrick to replace the pipes that would subsequently fail and cause the latest cyanide solution spill. Barrick operations have been suspended since March 28th, and local authorities have ordered the reengineering of the Veladero mine. A federal judge has called for the closure of the mine under Argentina’s Glacier laws, which require the complete suspension of mining operations after three serious incidents.

In response, Barrick has presented a $500 million reengineering plan to be implemented over a 5-year period. The Argentine government has yet to approve it. Local authorities are also taking blood samples from residents in the area, to determine health risks to the local population. In the US, investors and shareholders have now filed a class action against Barrick for misrepresenting the situation of Veladero.

Earlier this year on the other side of the Andes, 2,500 workers went on strike for 43 days at BHP’s Mina Escondida in Chile, demanding better working conditions for current and new employees. As a result of the strike, BHP suspended the construction of a second desalination plant in the port of Coloso and the extension of an existing concentration plant. BHP’s decision was the result of permanent blockades that prevented subcontractors from going to work on the projects.

Further north, 1,200 workers went on strike at the Southern Cerro Verde mine, Peru’s largest copper mine. The strike lasted three weeks and halved production during its duration. In February, Anglo American PLC suspended operations at its El Soldado copper mine in Chile after failing to receive regulatory approval from local authorities for the redesign of the mine.

While the tone of this post may seem pessimistic, the intention is to bring attention to some of the particularities of mining risks in Latin-America. The development of stricter regulatory frameworks, demands for better working conditions and rights, and the assessment of penalties for environmental violations are all signs that the region is developing and the mining sector continues to thrive. With respect to (re)insurance coverage for these facilities, while most insurance policies for mining operations exclude the risk of strikes, other types of losses involving suspension of operations by a government authority may present interesting coverage issues. Insurers and Insureds alike should be cognizant of the particularities of the region to better assess risks and provide adequate insurance coverage. 

Published by Hernán Cipriotti