LatAm region presents special opportunities for niche players

There will be unique opportunities for niche insurers in the Latin America and Caribbean (LAC) region over the coming year, says Eduardo Llobet, president of the Latin America operations of W. R. Berkley Corporation.

He predicts increasing demand for client-centric insurance and risk management solutions delivered to industry-specific segments of the economy, which could include infrastructure, services and tourism.

W. R. Berkley Corporation, founded in 1967, is an insurance holding company that is among the largest commercial lines property casualty insurance providers in the US.

The company can trace its history in Latin America to the 1990s when it acquired and started up diverse operations in Argentina. Today Berkley Latin America comprises several regional companies managing insurance and facultative reinsurance for the W. R. Berkley Insurance Group. It has insurance operations in Argentina, Brazil, Colombia, Puerto Rico and Uruguay and reinsurance operations in Buenos Aires, Argentina, Miami, FL and Bogota, Colombia, servicing all of Latin America. Berkley Latin America now plans not only to grow in areas that complement its existing operations, but also to expand geographically across the region.

“We are confident that there are unique opportunities to develop new businesses that benefit from pairing the W. R. Berkley Insurance Group’s resources with local relationships, market knowledge and experience to create a different, client-oriented insurance company offering niche products in the growing Latin American economies and insurance markets,” said Llobet.

“Additional advantages could be gained by identifying the economic strengths of the different demographics in the larger countries in the region,” Llobet said.

“At the risk of stating the obvious, the key to all opportunities remains in the focus on unwavering service with expert claims handling and the ability to provide products from insurance companies with superior financial ratings.”

LAC is a dynamic region. While the more recent weakening of key commodity prices has resulted in a slow-down in economic growth in 2014 and 2015, the LAC region has experienced a significant annual increase in gross domestic product (GDP) during the past decade. This strong growth in GDP in prior years has translated into even stronger growth in the insurance industry in the LAC region. As a result, by 2014 gross premium written had grown to approximately $185 billion.

“The sharp devaluation of local currencies, the economic slowdown and the drop in commodity prices all put pressure on growth of the insurance industry in the LAC region,” Llobet observed.

“It will be particularly interesting to monitor each country’s response to expected increases in inflation as the costs of more expensive imports are passed to consumers and the impact of inflation on medical and claims costs is realised.”

However, with a population of nearly 600 million people and an emerging middle class, Llobet sees the LAC region as offering important market growth potential.

“The appetite for insurance is increasing as younger people, new consumers and new investments in infrastructure and industries are creating amazing business opportunities. However, it is very important to consider Latin America’s heterogeneity and idiosyncrasies,” he said.

“Causing further optimism is the expectation that Mexico, Central America, and parts of the Caribbean would benefit from a stronger US recovery, while regulatory reforms have created a more business-friendly financial environment,” said Llobet.

“The LAC region is undoubtedly an interesting and more stable business destination and general expectations for the region are exciting in the longer term. To the extent that the different economies continue to grow and the propensity to insure continues to increase, the LAC region presents a myriad of opportunities across the diverse areas of the insurance industry—life and non-life, commercial and personal lines,” said Llobet.

“However, each country in the region is different, and assessing each one successfully demands carefully designed strategies,” he added.

With low penetration and density rates in the LAC region, the industry will be challenged to continue to develop innovative solutions to meet the needs of increasingly sophisticated and demanding consumers, he continued.

In addition to competitive market forces, these challenges include compliance with each country’s developing regulatory and legal landscapes. The forthcoming implementation of Solvency II-type regimes will create new challenges, but also new opportunities for companies with superior information technology, expertise and resources, said Llobet.

“With a particular focus on Brazil, there will be more international reinsurance opportunities in the near future with the latest modifications of the Brazilian reinsurance regulations.”

Beyond insurance-specific regulations, he sees increases in environmental legislation, consumer protection laws, human rights laws and intellectual property laws as having heightened the possibility of collective legal actions, which creates opportunities for new risk management solutions for the clients of the insurance industry in the LAC region.