Withdrawal of carriers from Miami sends strong message

The withdrawal of some carriers from the Miami market is sending a strong message to the Latin American underwriting community that some international re/insurers are adopting a more conservative approach to business in the region, according to BMS.

David Battman, head of international at BMS Group, and Jose Astorqui, chief executive officer at BMS Latin America, told FIDES Today that the community must wait to see if these closures are a one-off or a trend.

Astorqui says that there’s less capacity for major construction and infrastructure projects following the Colombian dam loss, which is forecast to be the largest ever in that class.

“We are having to look further afield for reinsurance for large and/or complex projects—which is perfectly fine and is part of our proposition as a firm,” he adds.

In the world of re/insurance, says BMS, there has been a reduction in capacity, as certain reinsurers have either pulled out entirely from some lines of business or have substantially reduced their support. According to Astorqui, this is happening in financial lines and in property catastrophe, both treaty and facultative.

However, since FIDES in Chile in 2017, BMS has witnessed growing interest from non-European and non-American reinsurance carriers into Latin American markets.

Battman says: “Santa Cruz will provide a good opportunity to find out how serious these new reinsurance carriers are about the region.”

In particular, BMS is seeing potential new entrants into Latin America from Asia—“from a brokers’ perspective, choice and diversity of A-rated capacity has to be good for our clients,” adds Battman.

Future performance
Latin America’s growth outlook was cut for the fifth consecutive month in August, following a poor first half of 2019.

“There is uncertainty over the future performance of two ‘top four’ regional economies—Mexico and Argentina—and Venezuelan business has almost disappeared. The majority of the region’s currencies depreciated against the US dollar at the start of August, which is not helping the results of our industry in the region,” explains Astorqui.

At the conference, Astorqui expects the question of whether Argentina’s economy “is going to implode (again) and, if there is a change in government, whether it will return to a protectionist reinsurance model” to dominate conversation.

On the negative side, Venezuela has become a very complicated market, given the political-economic situation and the compound effect of international sanctions.

In Brazil, the trickle-down effect of the hardening of the reinsurance market has not been felt so much, says Battman, principally due to the large treaties in Brazil and the local market capacity.

BMS also sees opportunity in areas such as surety and energy in Latin America. Larger economies such as Brazil and Mexico have had little in the way of government infrastructure projects in the last few years, explains Battman, but the impression locally is that things are picking up and that the next three years will see an increase in demand in these areas.

Driven by this, BMS is becoming increasingly active in energy, infrastructure and surety—adding to its core strengths in reinsurance, financial lines and managing general agent business.

“Opportunities are there in lines where reinsurers are hardening or have pulled back, such as D&O,” adds Astorqui.

The difficulty lies in getting this message to the local broker/cedant and insured to ensure the surprise increases in deductibles and premiums can be managed some way in advance of the renewal. The situation reminds the two executives of the dynamic in 2001, although it is not as severe.

Earlier this year, in June, BMS announced a significant re-financing deal that the executives claim positions it very well to become the main independent reinsurance broker in the world, “challenging the ‘alphabet brokers’ and providing closer attention to clients’ needs”.