Relationships are key in LatAm
While challenges exist, there are many potential growth opportunities for companies that grasp the culture and understand that relationships are key in the region, Bruno Krenboeck of AXIS Re, tells FIDES Today.
What is your approach and strategy in LatAm and why?
Relationships and trust count for a lot in Latin America, and client focus is one of AXIS’s key strengths. We proudly serve clients and brokers across multiple product lines from various locations, including our local hubs in Miami and Sao Paulo. All of AXIS’s business units (reinsurance, insurance and accident & health) have a long-term commitment to capturing further growth in this attractive region.
What is your outlook for the markets in LatAm?
Despite the current economic, political and regulatory challenges in some countries, we believe there is ample growth potential for the re/insurance markets in Latin America, given the relatively low insurance penetration in the region (2.5 percent on average), compared with the US and Europe (above 7 percent). The Latin American re/insurance sector is very important to the economic development of the region.
Where do you see opportunities for growth?
Product innovation and various infrastructure projects planned in the coming years will be a key growth driver for the re/insurance sector. The adoption of Solvency II in key markets such as Mexico, Brazil and Chile will further promote confidence in the region’s re/insurance industry and boost demand for reinsurance. Over the next five years, we expect most re/insurance growth in the member countries of the Pacific Alliance: Chile, Colombia, Mexico and Peru.
What are the challenges?
Low commodity prices, rising international interest rates, a strong US dollar and poor fiscal control continue to have a negative impact on the region’s growth outlook. Insurers in the region are also facing a variety of challenges: increased competition; a changing market structure with many mergers and acquisitions in recent years; technological advances that could cause disruptions; and increased regulation with respect to the adoption of risk-based models and rising customer expectations. A major challenge for foreign reinsurers is the high regulatory cost for market access in Brazil and Argentina.
How can the industry help close the protection gap?
The protection gap is a big topic in Latin America and has once again become much more visible in the recent cat events in Peru (Coastal El Niño) and Mexico (Oaxaca and Puebla earthquakes). Education around the benefit of insurance and reinsurance and direct government intervention are both important factors towards solving the protection gap. Micro-insurance and public-private partnerships (in particular for natural disaster coverage and prevention) are important drivers for the ongoing insurance market expansion in many countries.
Are rates adequate? How does this vary by line of business?
After a long soft cycle, current rates are clearly inadequate across most markets and products. We are already seeing the beginnings of a hardening market in the latest treaty and facultative renewals. Price increases will be most prominent in markets and lines of business most affected by the recent cat events.
Bruno Krenboeck is vice president, marketing director, Latin America, AXIS Re. He can be contacted at: bruno.krenboeck@axiscapital.com
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