{"id":57692,"date":"2026-07-07T14:39:08","date_gmt":"2026-07-07T14:39:08","guid":{"rendered":"https:\/\/my.legal500.com\/developments\/?post_type=legal_developments&p=57692"},"modified":"2026-07-07T14:39:08","modified_gmt":"2026-07-07T14:39:08","slug":"when-seismic-risk-meets-sovereign-risk-adjusting-earthquake-losses-in-venezuela","status":"publish","type":"legal_developments","link":"https:\/\/my.legal500.com\/developments\/thought-leadership\/when-seismic-risk-meets-sovereign-risk-adjusting-earthquake-losses-in-venezuela\/","title":{"rendered":"When Seismic Risk Meets Sovereign Risk: Adjusting Earthquake Losses in Venezuela"},"content":{"rendered":"

The recent earthquakes in Venezuela have caused significant damage and disruption. \u00a0Reported as among the strongest earthquakes to strike the country in more than a century, the event has placed communities, infrastructure, and emergency response systems under extraordinary strain. Fortunately, several countries and international organizations have come together to provide aid and support. The insurance industry is also stepping in, with its role in the aftermath of any catastrophe ultimately being a practical one: to help capital reach damaged assets, restore operations where possible, and support recovery in a disciplined way.<\/strong><\/p>\n

That said, the Venezuela earthquakes present a uniquely complex insurance and adjustment environment, particularly for multinational commercial insureds with operations, assets, or investments in the country. \u00a0While earthquake loss adjustment is typically complex, this case involves a catastrophe loss in a jurisdiction emerging from years of infrastructure deterioration, sanctions pressure, and a recent fragile political transition following the January 2026 operation involving Nicol\u00e1s Maduro.<\/p>\n

For insurers and reinsurers, the result is a difficult intersection of catastrophe response, global program architecture, local regulation, and geopolitical risk.<\/p>\n

A large economic loss does not necessarily mean a large insured loss<\/strong><\/p>\n

One of the first challenges is separating economic loss from insured loss. In many earthquake events, particularly in countries with low residential insurance penetration, the insured losses are likely to be heavily concentrated in large-scale commercial property, including industrial assets, energy and infrastructure, hotels, ports, financial institutions, and telecommunications facilities. Those losses may represent a relatively small portion of total national damage, but they may be highly complex on a claim-by-claim basis.<\/p>\n

For a multinational placement, relevant considerations may include: Which entity owned or leased the asset? Which policy responds? Was the risk insured locally, through a fronted local policy, through a global master program, through a captive, or through some combination of all of the above? What potential challenges exists, given the interplay between a local admitted policy under Venezuela law and a master-policy that is likely governed under foreign law? Is there DIC\/DIL coverage? Are limits, deductibles, sublimits, waiting periods, occurrence definitions, and sanctions clauses aligned across the program?\u00a0 The answers to these questions warrant early consideration, because they will likely shape what follows.<\/p>\n

The local policy may be only one piece of the program<\/strong><\/p>\n

For multinational commercial risks, Venezuelan situs property will often involve a local admitted policy with excess protection, reinsurance, or master-policy support sitting elsewhere. \u00a0That structure is common in global property programs, but it becomes more difficult in a politically sensitive and sanctions-impacted environment.<\/p>\n

A local policy may be necessary for compliance with Venezuelan insurance law. \u00a0A master policy may sit in London, the United States, Europe, Bermuda, or another international market. Reinsurers may be several steps removed from the original insured, but still exposed to the same factual loss. The insured may also have a captive or internal risk-financing layer.<\/p>\n

In a routine loss, those structures can be managed through established claims protocols. In a catastrophe, though, they can become pressure points. The local insurer may need to adjust the claim on the ground. The master-policy insurer may need to evaluate difference-in-conditions or difference-in-limits exposure. Reinsurers will likely require timely notice and reserve information. Brokers will be coordinating across several jurisdictions. And each participant may be subject to different regulations and reporting obligations.<\/p>\n

The claim should therefore begin with a program map. Before the adjustment turns to scope or quantum, the parties should identify the insured entities, all relevant covered locations, policy layers and attachment points, local and master interactions, reinsurance placements, and payment pathways.<\/p>\n

Access and evidence will be difficult<\/strong><\/p>\n

Earthquake losses are evidence-intensive. Engineers need to distinguish earthquake-caused structural damage from pre-existing issues, deferred maintenance, construction and design deficiencies, and ordinary wear and tear. \u00a0In Venezuela, that inquiry may be especially difficult.<\/p>\n

Many commercial structures may have been affected by years of underinvestment, limited maintenance, and prior unrepaired damage, all of which makes causation and scope analysis more complicated. The question will be what was already present, what must be repaired to restore the damaged property, and what work reflects code compliance, betterment, or long-deferred capital improvement.<\/p>\n

Aftershocks could add another layer. A building that is safe to inspect on one day may become unsafe the next. Emergency shoring, demolition, debris removal, temporary repairs, and government safety orders may alter the condition of the property before the insurer\u2019s experts can inspect. In some cases, physical evidence may be destroyed and it may be beyond the control of the stakeholders involved.<\/p>\n

Valuation may be harder than coverage<\/strong><\/p>\n

Even where coverage can be confirmed, valuation may also prove difficult.\u00a0 Replacement cost assumes that damaged property can be repaired or replaced in a reasonably functioning market. But post-earthquake Venezuela may present short-supplied or hyperinflated materials, currency barriers, limited availability of qualified contractors, damaged transportation routes, and sanctions-related constraints on vendors, banks, or state-linked counterparties.<\/p>\n

Those factors can materially affect repair cost, repair duration, and business interruption measurement. They can also create disputes over whether claimed costs are reasonable, whether they reflect post-loss demand surge, whether they include upgrades or code-driven improvements, and whether the insured can actually reinstate the property as claimed.<\/p>\n

For multinational companies, there may also be a tension between loss restoration and global capital planning. A company re-entering or expanding in Venezuela after recent political developments may view earthquake repairs as part of a broader reinvestment strategy. That is commercially understandable, but it can create insurance issues. Property insurance indemnifies covered loss but does not typically fund modernization, expansion, or strategic repositioning. The adjustment needs to separate covered repair from elective improvements.<\/p>\n

Sanctions compliance is a central, not peripheral, part of the claim<\/strong><\/p>\n

In Venezuela, sanctions compliance may become a material element of claim payment issuance.\u00a0 The relevant parties in a claim may include not only the named insured, but also affiliates, landlords, joint venture partners, state-owned entities, and other local loss payees. A payment that appears commercially routine may raise sanctions concerns depending on who receives it, who controls the recipient, which banks are involved, and whether U.S., UK, EU, or other sanctions regimes apply.<\/p>\n

For insurers, reinsurers, brokers, and adjusters with U.S., UK, EU, or international market connections, that means claim handling should include robust sanctions screening and careful documentation of legal authority for any transaction involving restricted parties or jurisdictions.<\/p>\n

Aggregation and reinsurance issues may move quickly<\/strong><\/p>\n

The reinsurance implications may also be significant, even if the total insured loss is not globally market-moving.<\/p>\n

Earthquake sequences raise aggregation questions. Are the initial shocks and aftershocks one occurrence or multiple occurrences? Does the policy contain an hours clause? Do separate commercial locations aggregate under a single catastrophe deductible? Are facultative placements implicated? And are local insurers retaining meaningful exposure or passing much of the risk into international markets?<\/p>\n

Those issues should also be addressed early. Reinsurers will want prompt information on affected accounts, likely ranges, policy limits, deductibles, coverage issues, and whether the losses are expected to pierce catastrophe layers. Cedants will need to preserve recoveries while also managing the practical difficulty of developing reliable reserves in a fluid environment.<\/p>\n

Conclusion<\/strong><\/p>\n

The Venezuela earthquakes present a complex insurance event for multinational commercial risks with Venezuelan exposure. They will test whether global insurance programs can operate effectively where the physical damage is local, the capital is international, the law is multi-jurisdictional, and the politics remain unsettled.<\/p>\n

Loss adjustment will require coordinated guidance across Venezuelan local requirements, global program structures, sanctions regimes, reinsurance relationships, and the commercial realities on the ground. Although the loss may have been caused by earthquake, the adjustment will be shaped by much more than seismic damage.<\/p>\n

By: Brandon L. Sipple and Marcos Remete<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-57692","legal_developments","type-legal_developments","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments\/57692","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments"}],"about":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/types\/legal_developments"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/media?parent=57692"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}