Reinsurers need to enter new ground to create opportunities
Some of the growth opportunities that exist for reinsurers currently operating in the Latin American region stem from entering lines of business they have not traditionally written in the past. That is the view of Derek Durst, international treaty underwriter for QBE Re.
He said new entrants will find it difficult to get a foothold as most cedants are maintaining existing reinsurer panels.
“The current challenges facing all reinsurers are excess capacity and lack of economic growth,” he added. “The drop in commodity prices has affected virtually all countries in the region and unless there is a rebound in the near future, most target economies will show negligible growth.”
He sees local reinsurance cession requirements and currency controls as significant impediments to doing business in countries such as Brazil, Argentina and Venezuela.
“Reinsurance pricing and continued pressure on original rates will most likely come up in every meeting at FIDES,” he added.
“Recent cat activity in the region will also be a topic of conversation.”
As ceding companies become more sophisticated, and if the economies in question show marked growth in the coming years, he said it is possible that insurance-linked securities (ILS) funds will start to play a part in the market. At present, however, lack of critical mass, data quality and programme pricing in general have combined to make other regions more attractive for the non-traditional players.
“QBE’s plans over the coming year are to stay as close as possible to our core clients and make every attempt to deepen our relationship with all of them,” said Durst.
“Now is not a time to be aggressive.”
He expects the market to develop slowly. “Our near to medium-term projections for the region contemplate negligible growth in the underlying economies. Maintaining what we have and laying the foundation for growth when things do turn around is our current strategy.”
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