15 November 2017 News

Big insurers exit LatAm on back of poor performance

“The trend of multinational ingress into the region seems to be waning, with some big insurance companies having sold, or being in the process of selling, their operations, due to less than satisfactory performance.”

This is the opinion of James Grieve, senior vice president at SCOR Reinsurance, speaking to Intelligent Insurer.

He added that as multinationals exit the arena, there’s a rising trend of the growth of multi-Latinas such as Assa and Suramericana.

“As an industry, the reinsurers have not done a great job of pricing these multi-territorial covers, offering over-sized discounts on the basis of a perceived increased exposure diversification,” explained Grieve.

He added: “The evidence of loss distributions shows the flaws in this approach, which needs to change as we construct a price reaction following the recent events.”

Grieve also expects consolidation over the medium-term, driven by the “belated but increasing” focus on solvency in most jurisdictions, although this will “occur quite slowly due to the implementation periods that generally apply”.

SCOR exited Venezuela some time ago due to “the payment situation”, and over recent years the company has chosen not to grow its property aggregates due to the deteriorating pricing environment.

According to Grieve, SCOR’s strategy in Latin America is based on “careful client selection, allied with portfolio management through line of business and territorial balance across the region”, an approach which has served the company well.

“However, there is now a clear need for the region to show a reaction given the breadth and scale of the 2017 losses,” he cautioned, adding that the catastrophes served as “a wake-up call” for the industry.

SCOR recently estimated that the total private insured market loss for the combined Harvey-Irma-Maria hurricanes and Mexico earthquakes could reach $95 billion.

“Major reinsurers are incurring significant losses throughout the Americas. We can expect that this will significantly impact the pricing environment going forward,” stated Grieve. SCOR doesn’t expect its financial ratings to be affected by the catastrophes.

Grieve added that Irma, Maria and the Mexican earthquakes have extracted the equivalent of 60 percent of gross written premium and 2.5 times the annual reinsurance premium generated in the region.

“The losses of 2017 have affected all the major reinsurers but they have impacted the Americas primarily. Nevertheless, we can expect to see some kind of spillover impact into Europe and the Far East,” he concluded.

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