Patria Re strengthening position as a specialty and niche player

Patria Re is working hard to strengthen its position as a specialty and niche Latin American player, supporting the development of companies that believe in partnerships and long-term relationships, says Ingrid Carlou, CEO of Patria RE.

“There are many very good players in Latin America who know their segments and markets intimately and who need support to improve their capability to serve an evolving demand with more sophisticated needs,” she said.

“Patria is getting closer to its markets. Today more than ever before we are concentrated on the relationships and proximity with our clients.”

In line with this, Patria Re has opened an office in Santiago to better serve Argentina, Paraguay, Uruguay and Chile.

Patria Re’s other new venture, in London, will be an important platform to develop specialty lines, to funnel products and services, to enhance its own and its clients’ offerings in the region and to reinforce the tools and capabilities it requires to remain a relevant player and a reference in the region, Carlou said.

Patria Re’s agreement with Pembroke Managing Agency (PMA) to host the Patria Special Purpose Syndicate (Patria SPS) is an important step forward, she added.

SPS 6125 has received in principle approval from Lloyd's. Its group of companies will be hosted by Syndicate 4000 and managed by Pembroke.

“This arrangement will provide Patria with access to the Lloyd’s market while bringing the market closer to Latin American reinsurance business and allow PMA and Patria SPS to contribute valuably to Lloyd’s vision for 2025.”

Carlou believes the main challenge currently facing the re/insurance industry in the Latin American region is to increase density and penetration.

“Even if countries like Puerto Rico and Chile are more advanced in this sense, average density and penetration remain very low with a great upside potential,” she said. “In order to achieve this, the industry needs a clear vision of what our role in each country should be.

“Governments need solid policy with regard not only to the insurance industry but also to the administration of the public risk. Last but not least, these policies must look at the potential of insurance as a tool to formalise the economy and reinforce the principle of law.”

On the other hand, Carlou notes that the development of the industry is highly correlated to economic development, which today does not look too rosy in the region—although it is also true that the situation of each country is very different, as is their exposure to external shocks and the economy’s vulnerabilities.

“Regulatory reform is another issue,” she said “In this case, Mexico took the lead in implementing Solvency II-type regulation. Overall, negotiations between the authorities and the industry were very dynamic and we expect they will bear fruit.”

Issues still on the table include the use of the economic balance sheet in replacement of the financial one, she said.

“In our view, the greatest challenge today will be to bring the regulator up to par with the needs of a much more sophisticated regulatory environment,” she added. “Insufficient quality resources on this end are, in our consideration, the biggest risk to the market.”

She also noted that the industry has to deal with the ongoing evolution of insurance industry at an international level.

“The low interest environment is transforming the industry far beyond recognition, and even if the direct impact of the excess of alternative capital has not had an immediate effect in Latin America, the excess capital overall is producing the same results as everywhere else.

“Both brokers and carriers will need to wake up to the immediate reality that our historical love affair will soon turn into a fight over who controls the client and how to increase margins in an environment where capital has become the greatest commodity and technology is redrafting the relationship with the market.”

Carlou is in no doubt that the emerging middle classes represent the main attraction to the industry at present, and that they will bring an important change in the dynamics of the market.

“It remains to be seen whether the current slowdown and recession in the developed economies and in China will squeeze out this still unsteady segment of the economy,” she said.

Hand in hand with the middle classes comes the emerging digital market for financial services, she continued. This will play an important role not only in giving access to the intermediation of wealth for all these people but in connecting the different financial services, including insurance, with a market that requires and demands lower prices and better service.

At FIDES, Carlou expects that discussion will centre on global economic growth, Solvency II regulation (capital requirements, corporate governance loads for middle players), and mergers and acquisitions.

“I hope that macro trends in the industry will also be covered and discussed,” she added.