Capacity and creative contracts can close protection gap
Offering capacity for new insurance needs such as cyber and specialised liability, and offering creative contracts for cat coverage can help close the protection gap in Latin America.
That is the view of Juan Fernando Serrano, executive president and CEO of Latin American insurance industry information provider Latino Insurance.
“The latter idea has to be worked, approved and paid for in an important percentage by the governments, which in the long run will pay less for cat premiums than for the economic losses of the uninsured risks,” he said.
Latino Insurance offers re/insurers standardised and updated technical and financial information for about 1,200 (life and non-life) insurance companies in the region.
Serrano explained that insurance and reinsurance growth are both directly related to the growth of the economy in each country.
“Hence, the economies with slow growth or those with reductions have impacted the growth of written and ceded premiums. A way to overcome this challenge is greater insurance penetration offering insurance to unattended segments of each market, with insurance solutions catered to those segments.”
There’s been a reduction of “open market” reinsurance, according to Serrano, due to greater market share (49 percent) of global insurers which cede internally to affiliated reinsurers.
“The ceded premiums during 2016 had a reduction of 4.7 percent, while in the last 10 years, the compounded average growth rate was 3.9 percent,” he said.
There’s also been a reduction of percentage ceded, driven by an increased risk appetite, changes in regulations in some countries, and because faster-growing lines require less reinsurance.
Permanent rate reductions have taken place due to increased capacity of reinsurance capital worldwide, explained Serrano, adding that the latest catastrophe losses may change this trend during the year-end renewals.
Another reason for the reduction is that more capacity is being offered in Latin America with the increased presence of reinsurers in the region.
This is especially true in Miami where there are more than 15 Lloyd’s syndicates with different size operations, plus more than 10 US and European reinsurers which use these offices as their Latin American headquarters.
More storeis from the FIDES Day One Newsletter