Tough competition, evolving regulations, continuing reforms and natural catastrophes characterise the Latin American re/insurance market, says K Sanath Kumar, chairman-cum-managing director for GIC Re.
“This market is beset with similar problems to any other market: excess capacity, aggressive pricing strategy and the resulting depressed prices,” he added.
Procedures and laws for registration of offshore reinsurers are different in each country in the region, so registration of reinsurers in Latin American markets is a problem, he continued
“The registration has to be renewed annually and this involves repeating the procedure all over again. That becomes a challenge for reinsurers like us that do not have a physical presence there. Hence our visibility is also quite low.”
Most of the countries in Latin American region are catastrophe-prone, and it’s therefore difficult to provide competitive terms or to take large exposures, noted Kumar. “We are a new entrant in this market hence lot of information at times is not forthcoming.”
Some of the countries in the Latin American region are small in size and the risk is not spread out. As a new player in the market, GIC Re often finds that the local cedants are not aware of its large capacities and what more it can offer them.
Kumar perceives multiple areas of opportunity in the region, notably as a result investment in infrastructure.
“The Latin American economies are currently in the throes of huge infrastructure projects,” he said. “These include the Rio Olympics in 2016 which has evoked much interest.
“For GIC Re Latin American markets are a new geography and therefore a huge potential for us. We can write bigger lines without worrying about accumulations. In the recent past we have written quite a lot from this region. We have been present here for over a decade now. The Latin American market presents big growth opportunities for new market entrants.”
GIC Re became actively engaged with this region recently and is now writing business from Venezuela, Guatemala, Paraguay, Honduras, Chile, Costa Rica, Peru and Nicaragua. Property business constitutes the major portion of the premium written.
“In 2014/15 there has been a growth of more than 100 percent in both treaty and facultative business written by us in this market,” said Kumar.
“Currently, we write only follow lines and don’t offer our full capacity. However, as we get the pulse of the market, we will be willing to offer more capacity, and write more treaties and facultative business from the region.”
GIC Re has already initiated a move in this regard in the Venezuelan market. After the formation of the BRICS development bank by Brazil, Russia, India, China and South Africa, GIC Re’s trade relations with Brazil are also on an upswing and will increase substantially over a period of time.
GIC Re plans to register itself in all the countries of this region.
“We would also like to begin writing both treaty and facultative business from all Latin American countries,” said Kumar.
The fact that Latin America is made up of developing economies means that potential for microinsurance is immense, added Kumar. As living standards rise and wage levels increase the uptake of insurance also increases.
He also noted that the Latin American markets are witnessing mergers and acquisitions, which creates opportunities for new players to enter the market.
“Several industrial groups, including those from the automobile and pharmaceutical sector from India, have established their presence in these markets which opens up several possibilities for us,” he added.
K Sanath Kumar can be contacted at: email@example.com
GIC Re, Sanath Kumar, Latin America