Event: Argentina’s partial default, 2014
Location: Buenos Aires, Argentina
Economic cost: GDP was projected to fall by 1.5% in 2014 and 0.3% in 2015, against a background of regional growth in Latin America of 0.8% and 1.5% in those years.
Description: Argentina has defaulted numerous times, and the partial default of July 2014 was its eighth since modern international bond markets were developed. The 2014 event involved $30bn of debt; the more extensive default of 2001-02 covered $81.8bn of debt and led to GDP falling by 10.9%.
Damage: Key retail data shows the impact of economic uncertainty that followed the default. Car registrations declined from an all-time high of 89,000 in December 2013 to 35,000 in January 2015. International trade was also severely impacted: in July 2014 Argentina’s balance of trade was $1.38bn in surplus; by December 2014 it had fallen to $74m.
Insight: A heightened crime rate in Buenos Aires sparked an increase in theft and burglary claims, and insurers faced a rise in fraudulent claims and arson, another typical recession-related phenomenon. Inflation soared to 23.9% in January 2015, threatening insurance companies with increased costs when paying claims.
Insurance solutions: The Lloyd's market offers cover in relation to Sovereign default. Examples of this include but are not limited to: Trade credit insurance, contract frustration and other political risk products, construction delay-in-start up coverage, political violence, commercial property (including wording for strikes, riots and civil commotion), directors' and officers' and other professional indemnity products, commercial crime insurance, travel insurance, business interruption and contingent business interruption.
Image: Graffiti in Buenos Aires illustrates the protest against "vulture funds", debts dating back to 2001 that were central to Argentina's partial default in 2014 (Getty Images)
Sources: Associación de Fábricas de Automotores, Argentina; The Economist; Trading Economics
