American Council of Life Insurance Statement on Change to the Chilean Retirement System

WASHINGTON, May 12 -- The American Council of Life Insurers issued the following statement on May 10, 2021:

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American Council of Life Insurers (ACLI) Chief International Officer Brad Smith made the following comments today on recent changes to the Chilean Retirement System:

"While U.S. life insurance companies are required to comply with the new law, we remain concerned that the policies will ultimately be harmful to Chileans trying to secure their family's financial future. And while these changes affect all Chileans, they will have a disproportionate impact on women's retirement savings. Women typically have less retirement savings than men and with longer life expectancies than men, they are at greater risk of living in poverty as they age. This new law will only make this problem worse.

"Beyond the impact on consumers, the breach of lawful rights formed by the annuity provisions in the new law create a new political risk for foreign investors engaged in or considering Chile as a market worthy of investment.

"The breach of lawful rights and damage to assets and equity caused by the annuity scheme have placed insurers in the unfortunate position of having to investigate all legal options available to ensure the protection of their lawful rights from the government's illegal expropriation.

"Chile has long had a reputation for upholding the rule of law and institutional integrity that has fostered a stable environment for foreign direct investment. The actions by Congress could cause many in the global investment community to reevaluate Chile as an investment destination. Adding to this concern is the fact that the Chilean Congress continues to entertain new legislative proposals in the pension and insurance sector that would further violate investors' lawful rights, effect further expropriation of private assets, and continue to undermine the integrity of the country's retirement finance system and pension-backed capital market. Many of our member companies have direct experience in markets where governments pursued such a course of action, and ACLI cautions that Chile appears perilously close to pursuing a path with regard to the retirement system, private assets and lawful investor rights similar to decisions taken earlier this century by other markets in Latin America. These decisions had predictably disastrous consequences for economic security and investor confidence. We urge legislators to reconsider the current expedient course, one that will cause economic harm for generations of Chileans.

"The life insurance industry has consistently made good faith efforts to contribute to the policy dialogue regarding pension reform in Chile. Over the past five years, we have offered multiple proposals for reform to the current system that would expand pension coverage, increase savings and foster improved financial security in retirement. Chile was a global pioneer in directly funded, individual retirement accounts.

"Our industry's recommendations for reform have consistently advocated for Chile to adopt policy measures that would keep pace with changes in demographics, the evolving labor market, and innovative pension designs adapted by other markets that have improved upon the Chilean model. There remains time for Chile to adapt and improve the existing AFP system, rather than take steps that will undermine it. ACLI hopes the 3rd AFP withdrawal and annuity legislation will not be followed by additional measures that reduce the vitality of the system, expropriate private assets, or violate lawful private rights. We urge the Chilean Congress to realize that its recent actions are permanently damaging Chile's reputation and jeopardizing a historically stable environment for foreign direct investment."