Caterpillars can cause rashes...

A rash caused by touching a caterpillar can look like welts, small, fluid-filled sacs called vesicles, raised red bumps, or areas of red, scaly skin. Sometimes a child may feel mild to moderate stinging or pain.

If your child actually touches a caterpillar and has an immediate reaction, the first thing you should do is remove as many of the tiny hairs that will have rubbed off on his or her skin as possible.
You can do this with adhesive tape: Rub a strip of tape onto the area where the hairs are and pull them off, like you would to remove lint from a piece of clothing. Repeat with fresh tape until you think you've gotten all the hairs you can. Then wash the area with soap and water and dab on a topical, low-potency steroid cream. If the rash really stings, an ice pack can relieve the pain.

https://www.verywellhealth.com/rashes-from-caterpillars-3969706